If You Had Bought Soosan Heavy Industries (KRX:017550) Shares Three Years Ago You'd Have Earned 176% Returns

It might be of some concern to shareholders to see the Soosan Heavy Industries Co., Ltd. (KRX:017550) share price down 28% in the last month. But in three years the returns have been great. In fact, the share price is up a full 176% compared to three years ago. It's not uncommon to see a share price retrace a bit, after a big gain. Only time will tell if there is still too much optimism currently reflected in the share price.

View our latest analysis for Soosan Heavy Industries

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over the last three years, Soosan Heavy Industries failed to grow earnings per share, which fell 74% (annualized). This was, in part, due to extraordinary items impacting earning in the last twelve months.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.

Languishing at just 0.3%, we doubt the dividend is doing much to prop up the share price. It could be that the revenue growth of 19% per year is viewed as evidence that Soosan Heavy Industries is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Soosan Heavy Industries' balance sheet strength is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Soosan Heavy Industries the TSR over the last 3 years was 178%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Soosan Heavy Industries has rewarded shareholders with a total shareholder return of 123% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Take risks, for example - Soosan Heavy Industries has 3 warning signs we think you should be aware of.

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.

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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.
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