The Annual Stock Price Gains of SOFIX Companies Outpace Earnings Growth

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The Annual Stock Price Gains of SOFIX Companies Outpace Earnings Growth

In stock trading you trade on the basis of your expectations. When you buy stock you hope that the price you paid for it will be justified by the profit the company makes in a year or two. Your expectations are also based on the company's historical performance.

However, earnings are not the only factor that defines the stock price. This is illustrated by the two charts below.

The first chart shows the annual profits posted in 2006 and 2007 by the 19 companies within the SOFIX index.

The second chart shows the stock price changes over the 12-month period.

The average hike in the annual earnings of the 19 companies stands at 123.5%, while the average hike in their stock prices almost reaches 200%.

Sparky Eltos is the indisputable leader in terms of earnings growth. Profit of the Lovech-based company grew from 929,000 leva to 9.3 mln leva (4.75 mln euros) in one single year. This is a hike of 901.29%. The stock on the other hand, went from 1.3 leva to 16 leva between Dec 2006 and Dec 2007, which is a change of + 1134.57%.

The second best performer is Elana Agricultural Land REIT. In 2006 the fund's income stood at 8.98 mln leva (4.59 mln euros), which rose to 47.87 mln leva (24.47 mln euros) in 2007 (+433.26%). We must note here that this result is attributed to a large extent to reevaluation of assets.

The stock price didn't go up with the same pace, though. Shares added just 72.42%, from 1.28 to 2.21 leva.

Corporate Commercial Bank booked the third biggest income hike among the SOFIX companies (+254.17%), becoming the top performing bank in the index. The other lenders in SOFIX ranked eights (FIBank), ninth (Central Cooperative Bank) and tenth (BACB).

Corporate Commercial Bank's profit surged from 6.544 mln (3.34 mln euros) to 23.177 mln leva (11.85 mln euros), but shares only added 60.87% y/y to 94.11 leva.

Other curious examples here are Orgachim and Toplivo. Although the earnings of both declined, their stocks soared by respectively 480.59% and 58.91%.

Meanwhile, shares of Kaolin and FIBank rose at a slowest pace than the companies' earnings.

Earnings change:

Company SymbolProfit 2006(in mln BGN)Profit 2007 (in mln BGN)Change %
ELTOS9299302901,29
ELARG897647865433,26
CORP654423177254,17
CHIM53330120069125,14
HDPAT863218103109,72
MONBAT843016885100,3
KAO91841813597,46
FIB286865101377,83
CCB119002032170,76
BACB341405311455,58
OTZK152822344753,43
MCH3341427327,9
EURINS4237533325,87
ALB168572081023,45
IHLBL96471186422,98
SFARM262593171920,79
NEOH324133533,46
TOPL70895576-21,34
ORGH78935129-35,02

 Stock price change:

CompanyPrice Dec'06 (BGN)Price Dec'07 (BGN)Change %
ELTOS1,3161134,57
HDPAT2401520533,33
ORGH115,4670480,59
MONBAT*6,9531,48353,01
OTZK24,9589,6259,19
IHLBL4,3511,9173,81
EURINS6,2516,32161,25
CHIM7,4715,41106,43
MCH7,0313,8196,44
ELARG1,282,2172,42
NEOH44,8176,971,61
BACB49,4681,9965,78
CORP*58,594,1160,87
TOPL17,527,8158,91
ALB77,13118,553,64
CCB7,2510,1339,69
SFARM6,818,9931,94
KAO*13,517,529,59
FIB*10,711,68,41

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