Investors in LG Electronics (KRX:066570) have unfortunately lost 39% over the last three years

For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term LG Electronics Inc. (KRX:066570) shareholders, since the share price is down 41% in the last three years, falling well short of the market decline of around 5.1%. And over the last year the share price fell 23%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years that the share price fell, LG Electronics' earnings per share (EPS) dropped by 35% each year. This fall in the EPS is worse than the 16% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into LG Electronics' key metrics by checking this interactive graph of LG Electronics's earnings, revenue and cash flow.

A Different Perspective

We regret to report that LG Electronics shareholders are down 23% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.6%. 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. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand LG Electronics better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for LG Electronics you should know about.

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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.