The five-year decline in earnings might be taking its toll on Sam-A Aluminium Company (KRX:006110) shareholders as stock falls 12% over the past week

The last three months have been tough on Sam-A Aluminium Company, Limited (KRX:006110) shareholders, who have seen the share price decline a rather worrying 41%. But that doesn't undermine the fantastic longer term performance (measured over five years). To be precise, the stock price is 944% higher than it was five years ago, a wonderful performance by any measure. Arguably, the recent fall is to be expected after such a strong rise. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 54% decline over the last twelve months. We love happy stories like this one. The company should be really proud of that performance!

Since the long term performance has been good but there's been a recent pullback of 12%, let's check if the fundamentals match the share price.

See our latest analysis for Sam-A Aluminium Company

Given that Sam-A Aluminium Company only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Sam-A Aluminium Company saw its revenue grow at 11% per year. That's a pretty good long term growth rate. However, the share price gain of 60% during the period is considerably stronger. We usually like strong growth stocks but it does seem the market already appreciates this one quite well!

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Sam-A Aluminium Company's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sam-A Aluminium Company the TSR over the last 5 years was 999%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Sam-A Aluminium Company shareholders are down 54% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.4%. 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. Longer term investors wouldn't be so upset, since they would have made 62%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For example, we've discovered 3 warning signs for Sam-A Aluminium Company (1 doesn't sit too well with us!) that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com