If You Had Bought SIMPAC (KRX:009160) Shares A Year Ago You'd Have Earned 11% Returns

On average, over time, stock markets tend to rise higher. This makes investing attractive. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the SIMPAC Inc. (KRX:009160), share price is up over the last year, but its gain of 11% trails the market return. We'll need to follow SIMPAC for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

View our latest analysis for SIMPAC

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).

Over the last twelve months, SIMPAC actually shrank its EPS by 89%.

So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We doubt the modest 2.0% dividend yield is doing much to support the share price. SIMPAC's revenue actually dropped 22% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at SIMPAC's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, SIMPAC's TSR for the last year was 14%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're happy to report that SIMPAC are up 14% over the year (even including dividends). The bad news is that's no better than the average market return, which was roughly 44%. However, that falls short of the 30% gain it has made, for shareholders, in the last three months. It's worth taking note when returns accelerate, as it can indicate positive change in the underlying business, and winners often keep winning. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that SIMPAC is showing 3 warning signs in our investment analysis , 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.

If you decide to trade SIMPAC, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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