CJ Seafood (KRX:011150) shareholders notch a 5.2% CAGR over 5 years, yet earnings have been shrinking

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term CJ Seafood Corporation (KRX:011150) shareholders have enjoyed a 29% share price rise over the last half decade, well in excess of the market return of around 14% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 9.9% in the last year.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for CJ Seafood

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

CJ Seafood's earnings per share are down 1.3% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It is not great to see that revenue has dropped by per year over five years. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling CJ Seafood stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that CJ Seafood shareholders have received a total shareholder return of 9.9% over the last year. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for CJ Seafood that you should be aware of.

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.