Recent 12% pullback isn't enough to hurt long-term Hanshin Machinery (KRX:011700) shareholders, they're still up 85% over 5 years

It might be of some concern to shareholders to see the Hanshin Machinery Co., Ltd. (KRX:011700) share price down 24% in the last month. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 76% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 48% decline over the last twelve months.

Although Hanshin Machinery has shed ₩11b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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Given that Hanshin Machinery didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Hanshin Machinery can boast revenue growth at a rate of 3.5% per year. Put simply, that growth rate fails to impress. The modest growth is probably broadly reflected in the share price, which is up 12%, per year over 5 years. We'd be looking for the underlying business to grow revenue a bit faster.

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

If you are thinking of buying or selling Hanshin Machinery stock, you should check out this FREE detailed report on its balance sheet .

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Hanshin Machinery the TSR over the last 5 years was 85%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Hanshin Machinery shareholders are down 48% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Hanshin Machinery better, we need to consider many other factors. For example, we've discovered 2 warning signs for Hanshin Machinery (1 doesn't sit too well with us!) that you should be aware of before investing here.

Of course Hanshin Machinery may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.