CS Wind's (KRX:112610) five-year total shareholder returns outpace the underlying earnings growth

It might be of some concern to shareholders to see the CS Wind Corporation (KRX:112610) share price down 19% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 170% in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 28% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 5.2%, let's check if the fundamentals match the share price.

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, CS Wind achieved compound earnings per share (EPS) growth of 27% per year. The EPS growth is more impressive than the yearly share price gain of 22% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.51.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that CS Wind 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?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CS Wind's TSR for the last 5 years was 201%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that CS Wind shareholders are down 26% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 6.6%. 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 25%, 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. It's always interesting to track share price performance over the longer term. But to understand CS Wind better, we need to consider many other factors. For instance, we've identified 2 warning signs for CS Wind (1 makes us a bit uncomfortable) that you should be aware of.

Of course CS Wind 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.