Kia's (KRX:000270) earnings growth rate lags the 22% CAGR delivered to shareholders

While Kia Corporation (KRX:000270) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 18% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 128% the gain in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today.

While the stock has fallen 5.9% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Check out our latest analysis for Kia

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Kia managed to grow its earnings per share at 45% a year. This EPS growth is higher than the 18% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.88.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Kia has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Kia stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Kia's TSR for the last 5 years was 173%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Kia shareholders have received a total shareholder return of 22% over the last year. And that does include the dividend. However, that falls short of the 22% TSR per annum it has made for shareholders, each year, over five years. Before forming an opinion on Kia you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

Of course Kia may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South Korean exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.