Stock Analysis

Sejin Heavy Industries' (KRX:075580) five-year earnings growth trails the 25% YoY shareholder returns

KOSE:A075580
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Sejin Heavy Industries Co., Ltd. (KRX:075580) share price has soared 164% in the last half decade. Most would be very happy with that. In more good news, the share price has risen 14% in thirty days.

Since the stock has added ₩56b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Sejin 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 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 five years of share price growth, Sejin Heavy Industries achieved compound earnings per share (EPS) growth of 25% per year. This EPS growth is reasonably close to the 21% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
KOSE:A075580 Earnings Per Share Growth December 13th 2024

We know that Sejin Heavy Industries has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Sejin Heavy Industries the TSR over the last 5 years was 200%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Sejin Heavy Industries shareholders have received a total shareholder return of 85% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 25%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Sejin Heavy Industries better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Sejin Heavy Industries you should be aware of, and 1 of them shouldn't be ignored.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.