Shareholders Of SFA Engineering (KOSDAQ:056190) Must Be Happy With Their 64% Return

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the SFA Engineering Corporation (KOSDAQ:056190) share price is up 43% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 11%.

Check out our latest analysis for SFA Engineering

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, SFA Engineering achieved compound earnings per share (EPS) growth of 29% per year. This EPS growth is higher than the 7% 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 11.70 also suggests market apprehension.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for SFA Engineering the TSR over the last 5 years was 64%, 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

SFA Engineering shareholders are up 14% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand SFA Engineering better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for SFA Engineering you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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