Oricom (KOSDAQ:010470) sheds 11% this week, as yearly returns fall more in line with earnings growth

Oricom Inc. (KOSDAQ:010470) shareholders might be concerned after seeing the share price drop 12% in the last quarter. Looking further back, the stock has generated good profits over five years. Its return of 63% has certainly bested the market return! While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 18% drop, in the last year.

Although Oricom has shed ₩8.8b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Our free stock report includes 3 warning signs investors should be aware of before investing in Oricom. Read for free now.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Oricom achieved compound earnings per share (EPS) growth of 9.7% per year. So the EPS growth rate is rather close to the annualized share price gain of 10% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Oricom's TSR for the last 5 years was 93%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Oricom shareholders are down 14% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 5.7%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 14% 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. Case in point: We've spotted 3 warning signs for Oricom you should be aware of, and 1 of them is a bit concerning.

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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.