Investors three-year losses continue as LG H&H (KRX:051900) dips a further 7.2% this week, earnings continue to decline

Every investor on earth makes bad calls sometimes. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of LG H&H Co., Ltd. (KRX:051900), who have seen the share price tank a massive 74% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And the share price decline continued over the last week, dropping some 7.2%.

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

See our latest analysis for LG H&H

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

LG H&H saw its EPS decline at a compound rate of 47% per year, over the last three years. This fall in the EPS is worse than the 36% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 47.33, it's fair to say the market sees a brighter future for the business.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

LG H&H shareholders are down 15% for the year (even including dividends), but the market itself is up 8.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 11% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand LG H&H better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for LG H&H you should be aware of.

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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.