Optimism around LG Chem (KRX:051910) delivering new earnings growth may be shrinking as stock declines 3.0% this past week

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of LG Chem, Ltd. (KRX:051910) have had an unfortunate run in the last three years. Sadly for them, the share price is down 60% in that time. The more recent news is of little comfort, with the share price down 35% in a year. Unfortunately the share price momentum is still quite negative, with prices down 16% in thirty days.

After losing 3.0% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for LG Chem

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, LG Chem's earnings per share (EPS) dropped by 63% each year. This fall in the EPS is worse than the 26% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. With a P/E ratio of 181.24, it's fair to say the market sees a brighter future for the business.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

A Different Perspective

LG Chem shareholders are down 35% for the year (even including dividends), but the market itself is up 5.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 0.2% per year over half a decade. 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 2 warning signs for LG Chem that you should be aware of before investing here.

Of course LG Chem may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.