Dongwon Systems' (KRX:014820) Shareholders Are Down 59% On Their Shares

It is doubtless a positive to see that the Dongwon Systems Corporation (KRX:014820) share price has gained some 56% in the last three months. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 59% in that time. So we're hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.

View our latest analysis for Dongwon Systems

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

While the share price declined over five years, Dongwon Systems actually managed to increase EPS by an average of 11% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

We don't think that the 1.3% is big factor in the share price, since it's quite small, as dividends go. It could be that the revenue decline of 4.6% per year is viewed as evidence that Dongwon Systems is shrinking. This has probably encouraged some shareholders to sell down the stock.

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 Dongwon Systems' 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Dongwon Systems, it has a TSR of -56% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Dongwon Systems shareholders gained a total return of 39% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 9% per year, over five years. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Dongwon Systems better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Dongwon Systems you should know about.

But note: Dongwon Systems may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on KR exchanges.

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