Earnings are growing at Hanmi Science (KRX:008930) but shareholders still don't like its prospects

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Hanmi Science Co., Ltd. (KRX:008930) shareholders, since the share price is down 32% in the last three years, falling well short of the market decline of around 0.2%. The more recent news is of little comfort, with the share price down 28% in a year.

If the past week is anything to go by, investor sentiment for Hanmi Science isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Hanmi Science

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. 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 unfortunate three years of share price decline, Hanmi Science actually saw its earnings per share (EPS) improve by 25% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

The modest 0.7% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 12% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Hanmi Science further; while we may be missing something on this analysis, there might also be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Hanmi Science's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Hanmi Science shareholders are down 28% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.4%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before deciding if you like the current share price, check how Hanmi Science scores on these 3 valuation metrics.

Of course Hanmi Science may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.