Songwon Industrial (KRX:004430) earnings and shareholder returns have been trending downwards for the last three years, but the stock swells 12% this past week

This week we saw the Songwon Industrial Co., Ltd. (KRX:004430) share price climb by 12%. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 40% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

The recent uptick of 12% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for Songwon Industrial

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. 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.

Songwon Industrial saw its EPS decline at a compound rate of 14% per year, over the last three years. This change in EPS is reasonably close to the 16% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

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 Songwon Industrial's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Songwon Industrial's TSR for the last 3 years was -37%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 2.4% in the twelve months, Songwon Industrial shareholders did even worse, losing 24% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Songwon Industrial better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Songwon Industrial , and understanding them should be part of your investment process.

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.

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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.