LS Eco Energy (KRX:229640) sheds 6.9% this week, as yearly returns fall more in line with earnings growth

Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. For example, the LS Eco Energy Ltd. (KRX:229640) share price is up a whopping 382% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 19% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 22% in 90 days).

Since the long term performance has been good but there's been a recent pullback of 6.9%, let's check if the fundamentals match the share price.

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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).

Over half a decade, LS Eco Energy managed to grow its earnings per share at 18% a year. This EPS growth is lower than the 37% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

We know that LS Eco Energy has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling LS Eco Energy 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of LS Eco Energy, it has a TSR of 436% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

LS Eco Energy provided a TSR of 6.3% over the year (including dividends). That's fairly close to the broader market return. It has to be noted that the recent return falls short of the 40% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes LS Eco Energy a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand LS Eco Energy better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with LS Eco Energy .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.