HD Korea Shipbuilding & Offshore Engineering's (KRX:009540) investors will be pleased with their massive 312% return over the last three years

HD Korea Shipbuilding & Offshore Engineering Co., Ltd. (KRX:009540) shareholders might be concerned after seeing the share price drop 10% in the last month. But over the last three years the stock has shone bright like a diamond. In fact, the share price has taken off in that time, up 303%. Arguably, the recent fall is to be expected after such a strong rise. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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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 three years of share price growth, HD Korea Shipbuilding & Offshore Engineering moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how HD Korea Shipbuilding & Offshore Engineering has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling HD Korea Shipbuilding & Offshore Engineering stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

We've already covered HD Korea Shipbuilding & Offshore Engineering's share price action, but we should also mention its 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. Dividends have been really beneficial for HD Korea Shipbuilding & Offshore Engineering shareholders, and that cash payout contributed to why its TSR of 312%, over the last 3 years, is better than the share price return.

A Different Perspective

It's good to see that HD Korea Shipbuilding & Offshore Engineering has rewarded shareholders with a total shareholder return of 89% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 30% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Is HD Korea Shipbuilding & Offshore Engineering cheap compared to other companies? These 3 valuation measures might help you decide.

We will like HD Korea Shipbuilding & Offshore Engineering better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

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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.