If You Had Bought Nexen Tire's (KRX:002350) Shares Five Years Ago You Would Be Down 44%

It is a pleasure to report that the Nexen Tire Corporation (KRX:002350) is up 32% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 44%, which falls well short of the return you could get by buying an index fund.

View our latest analysis for Nexen Tire

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Looking back five years, both Nexen Tire's share price and EPS declined; the latter at a rate of 66% per year. This was, in part, due to extraordinary items impacting earnings. This fall in the EPS is worse than the 11% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve. The high P/E ratio of 1.23k suggests that shareholders believe earnings will grow in the years ahead.

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

Dive deeper into Nexen Tire's key metrics by checking this interactive graph of Nexen Tire's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Nexen Tire the TSR over the last 5 years was -40%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 44% in the last year, Nexen Tire shareholders lost 7.9% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 7% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Nexen Tire has 4 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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This article by Simply Wall St is general in nature. 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.
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