The past three-year earnings decline for Sajo Industries (KRX:007160) likely explains shareholders long-term losses

Sajo Industries Company Limited (KRX:007160) shareholders should be happy to see the share price up 10% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 33% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

On a more encouraging note the company has added ₩17b 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.

Our free stock report includes 3 warning signs investors should be aware of before investing in Sajo Industries. Read for free now.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Sajo Industries saw its EPS decline at a compound rate of 53% per year, over the last three years. In comparison the 13% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Sajo Industries' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Sajo Industries shareholders have received a total shareholder return of 2.6% over the last year. Of course, that includes the dividend. However, that falls short of the 4% TSR per annum it has made for shareholders, each year, over five years. 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. To that end, you should learn about the 3 warning signs we've spotted with Sajo Industries (including 1 which is a bit unpleasant) .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.