The past three-year earnings decline for SK ChemicalsLtd (KRX:285130) likely explains shareholders long-term losses

It's nice to see the SK Chemicals Co.,Ltd (KRX:285130) share price up 10% in a week. Meanwhile over the last three years the stock has dropped hard. Indeed, the share price is down a tragic 68% in the last three years. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.

While the stock has risen 10% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

We've discovered 3 warning signs about SK ChemicalsLtd. View them for free.

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 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).

SK ChemicalsLtd saw its EPS decline at a compound rate of 68% per year, over the last three years. This fall in the EPS is worse than the 32% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 87.71, it's fair to say the market sees a brighter future for the business.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market lost about 5.7% in the twelve months, SK ChemicalsLtd shareholders did even worse, losing 31% (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 2% 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. It's always interesting to track share price performance over the longer term. But to understand SK ChemicalsLtd better, we need to consider many other factors. For example, we've discovered 3 warning signs for SK ChemicalsLtd (1 shouldn't be ignored!) that you should be aware of before investing here.

Of course SK ChemicalsLtd 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.