Why did the stock price plummet despite the listed company's profit growth?

The longer you stay in the market, the more you realize that short-term price movements are driven primarily by changes in valuation. Even if a listed company’s profits grow, poor quality of that growth can easily trigger a significant revaluation—leading directly to a sharp drop in share price. This is especially common in growth-stock investing. For example: A company has a solid business model and operates in a booming industry. Analysts project its annual growth rate over the next three years to be 40%—a textbook growth stock. The market rewards it generously with a 40x P/E multiple. But when earnings results arrive, growth comes in at only 35%. Though seemingly just a 5-percentage-point shortfall—and still robust—the capital markets quickly recalculate: “Without 40% growth, this valuation tier no longer applies.” The P/E multiple drops to 30x, and the stock plunges over 20%. Uninitiated investors may be utterly bewildered—“A 5% earnings miss caused a 25% price crash? That’s absurd!” Yet is this decline justified? Yes—because valuation elasticity is a core, even dominant, driver of stock price volatility. There’s a classic Wall Street adage: “In the short run, the market is a voting machine; in the long run, it’s a weighing machine.” If that’s hard to grasp, consider this alternative perspective: In real life, corporate development is almost always continuous—not abrupt. Companies rarely leap from rock bottom to peak overnight—even after launching a breakthrough product, that product didn’t materialize out of thin air yesterday. So, fundamental business conditions often change little over a single quarter or half-year. Valuation, however, obeys no such continuity. It can jump instantly—say, on the announcement of a new product—causing an immediate, dramatic surge.

Write me my first letter from the future—my current holdings and plans.

In the past, I’d have said: “Grande’s management team is definitely better at making money than I am—just relax.” Now, after over a year navigating the stock market—and witnessing systemic risk, sector-wide risk, and company-specific risk—I no longer dare claim confidently that I’ll make money. Still, I’m proactively mitigating risk through rigorous individual stock analysis and diversified portfolio construction. The risk of *not* investing lies in inflation—watching my hard-earned money steadily lose purchasing power is something I simply cannot tolerate. Investing in equities is, therefore, my carefully weighed decision. There’s a line from the film *High & Low*: “People never stop moving—they just keep advancing in the direction they believe is right…” Even if I fail, the struggle itself is worthwhile. Because success means financial freedom—enough to support loved ones, find true friends, care for family, and even indulge in a bit of prestige. My current holdings: First, Huadong Medicine. ROE > 15% for the past five years. Core products: Bailing Capsules and Acarbose. To demystify pharmaceutical stocks, I walked into a local pharmacy and asked, “Do you carry Acarbose?” “Yes,” the clerk replied—and pulled out a box. “How much?” “¥41.” She reached into a cabinet and handed me a small box. I scrutinized the label—“Zhongmei Huadong.” My heart leapt. A listed company whose products reach even county-level pharmacies is unlikely to be subpar. Then I said, “I’ll come back later to buy.” And awkwardly turned away—leaving behind what I imagined was a dashing silhouette (in reality, I skipped away like a goofy kid, tripping every third step). I’m truly grateful for my own shameless audacity—just asking, without buying. Second, Enhua Pharmaceutical. Also boasts ROE > 15% over the past five years. I bought in after seeing the controlling shareholder buying shares during a trading halt—though I forget now whether it was the controlling shareholder or a senior executive. Either way, I followed suit—albeit in a modest position. Third, Jin Tuo Lang (Golden Mantis). A leader in China’s architectural decoration industry. ROE > 15% for the past five years. Accounts receivable growth has not outpaced revenue growth. Within its sector, it competes one-on-one against thirty rivals—and wins effortlessly. But when its controlling shareholder Zhu Xingliang was investigated—and ultimately arrested—for bribery, the company’s growth rate collapsed: from 32% down to 12%, then to −9.8% by 2015. After his release, growth rebounded: +5.07% in 2016, +7.12% in 2017, and +19.49% in 2018. Its business channels are also expanding into the home renovation segment. Within three years, it overtook Dongyi Risheng—the former leader in home renovation. According to group strategy, home renovation will eventually account for 50% of total business—a far healthier model. Recently, another Jin Tuo Lang executive was caught in a bribery scandal, triggering a temporary selloff. At that time, I noticed Zhu Xingliang had personally invested ¥100 million into Jin Tuo Lang shares—so I bought too. His capabilities are extraordinary: one man against ten. The industry is massive, highly fragmented, and fiercely competitive—yet Jin Tuo Lang stands a strong chance of survival. Still, it’s a relatively high-risk company, reflected in its low market valuation. Fourth, Yanghe Shares. Selling Gree to buy Yanghe remains my eternal regret—ha ha—what a silly move! A top-tier growth player in the baijiu sector, ranked third nationally, yet trading at a cheaper valuation than peers. No further comment needed. Fifth, Nanjing Bank. ROE > 15% for the past five years. Non-performing loan ratio consistently below 1% for eight years. Provision coverage ratio exceeds 400%. Dividend payout ratio ranks just below the Big Four state-owned banks—but offers the highest dividend yield among all listed banks. Will the bank’s net profit vanish next year? Will it stop paying dividends to shareholders?

Oil-Dri Corp Stock Falls 6.4%, Remains Overvalued Despite High Quality Score

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Oil-Dri Corp shares declined 6.4% to $70.49, remaining significantly overvalued with an intrinsic value estimate of $47.70 despite a 72/100 quality rating.

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