The total return for Cheryong ElectricLtd (KOSDAQ:033100) investors has risen faster than earnings growth over the last five years

While Cheryong Electric Co.,Ltd. (KOSDAQ:033100) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 30% in the last quarter. But over five years returns have been remarkably great. In that time, the share price has soared some 766% higher! Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. It really delights us to see such great share price performance for investors.

Since the long term performance has been good but there's been a recent pullback of 9.3%, let's check if the fundamentals match the share price.

View our latest analysis for Cheryong ElectricLtd

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

During five years of share price growth, Cheryong ElectricLtd achieved compound earnings per share (EPS) growth of 85% per year. This EPS growth is higher than the 54% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.48 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Cheryong ElectricLtd has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Cheryong ElectricLtd's TSR for the last 5 years was 824%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Cheryong ElectricLtd has rewarded shareholders with a total shareholder return of 154% in the last twelve months. That's including the dividend. That's better than the annualised return of 56% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Cheryong ElectricLtd better, we need to consider many other factors. For instance, we've identified 2 warning signs for Cheryong ElectricLtd (1 is a bit unpleasant) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.