The past three-year earnings decline for Hanssem (KRX:009240) likely explains shareholders long-term losses

It's nice to see the Hanssem Co., Ltd. (KRX:009240) share price up 10% in a week. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 49% in the last three years, falling well short of the market return.

On a more encouraging note the company has added ₩91b to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Hanssem

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Hanssem moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. However, the weak share price might be related to the fact revenue has been disappearing at a rate of 5.1% each year, over three years. In that case, the current EPS might be viewed by some as difficult to sustain.

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

Hanssem is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Hanssem, it has a TSR of -40% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Hanssem shareholders have received a total shareholder return of 11% over one year. Of course, that includes the dividend. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Hanssem that you should be aware of.

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.