Korea Shipbuilding & Offshore Engineering (KRX:009540) Shareholders Have Enjoyed A 35% Share Price Gain

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market But Korea Shipbuilding & Offshore Engineering Co., Ltd. (KRX:009540) has fallen short of that second goal, with a share price rise of 35% over five years, which is below the market return. The last year has been disappointing, with the stock price down 11% in that time.

See our latest analysis for Korea Shipbuilding & Offshore Engineering

Given that Korea Shipbuilding & Offshore Engineering only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Korea Shipbuilding & Offshore Engineering saw its revenue shrink by 27% per year. The falling revenue is arguably somewhat reflected in the lacklustre return of 6% per year over that time. That's pretty decent given the top line decline, and lack of profits. Of course, a closer look at the bottom line - and any available analyst forecasts - could reveal an opportunity (if they point to future growth).

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Korea Shipbuilding & Offshore Engineering is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Korea Shipbuilding & Offshore Engineering stock, you should check out this free report showing analyst consensus estimates for future profits.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Korea Shipbuilding & Offshore Engineering's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Korea Shipbuilding & Offshore Engineering's TSR of 54% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

While the broader market gained around 45% in the last year, Korea Shipbuilding & Offshore Engineering shareholders lost 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For instance, we've identified 2 warning signs for Korea Shipbuilding & Offshore Engineering (1 is a bit unpleasant) that you should be aware of.

We will like Korea Shipbuilding & Offshore Engineering better if we see some big insider buys. While we wait, check out this free list of growing companies 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 KR exchanges.

If you’re looking to trade Korea Shipbuilding & Offshore Engineering, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide 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.