LG Chem (KRX:051910) adds ₩1.8t to market cap in the past 7 days, though investors from three years ago are still down 54%

It's nice to see the LG Chem, Ltd. (KRX:051910) share price up 10% in a week. But that is small recompense for the exasperating returns over three years. Tragically, the share price declined 55% in that time. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf.

On a more encouraging note the company has added ₩1.8t to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for LG Chem

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 Chem saw its share price decline over the three years in which its EPS also dropped, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on LG Chem's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 0.7% in the twelve months, LG Chem shareholders did even worse, losing 47% (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 5% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for LG Chem you should know about.

But note: LG Chem 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 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.