LG Corp. (KRX:003550) shareholders have seen the share price descend 11% over the month. Looking on the brighter side, the stock is actually up over twelve months. In that time, it is up 82%, which isn't bad, but is below the market return of 102%.
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).
LG was able to grow EPS by 78% in the last twelve months. We note that the earnings per share growth isn't far from the share price growth (of 82%). So this implies that investor expectations of the company have remained pretty steady. It looks like the share price is responding to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that LG has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for LG the TSR over the last year was 88%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
LG shareholders are up 88% for the year (even including dividends). But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 8% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Even so, be aware that LG is showing 1 warning sign in our investment analysis , you should know about...
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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