Songwon Industrial's (KRX:004430) earnings have declined over three years, contributing to shareholders 40% loss

This week we saw the Songwon Industrial Co., Ltd. (KRX:004430) share price climb by 10%. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 43% in the last three years, significantly under-performing the market.

The recent uptick of 10% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See 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. 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.

Songwon Industrial saw its EPS decline at a compound rate of 6.9% per year, over the last three years. The share price decline of 17% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 9.29.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Songwon Industrial's key metrics by checking this interactive graph of Songwon Industrial's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Songwon Industrial the TSR over the last 3 years was -40%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Songwon Industrial had a tough year, with a total loss of 32% (including dividends), against a market gain of about 2.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Songwon Industrial is showing 2 warning signs in our investment analysis , you should know about...

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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.