Investors three-year losses continue as SHINSEGAE (KRX:004170) dips a further 7.8% this week, earnings continue to decline

As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term SHINSEGAE Inc. (KRX:004170) shareholders have had that experience, with the share price dropping 48% in three years, versus a market decline of about 6.0%. The last week also saw the share price slip down another 7.8%. But this could be related to the soft market, which is down about 5.2% in the same period.

If the past week is anything to go by, investor sentiment for SHINSEGAE isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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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).

During the three years that the share price fell, SHINSEGAE's earnings per share (EPS) dropped by 28% each year. This fall in the EPS is worse than the 19% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

This free interactive report on SHINSEGAE's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for SHINSEGAE the TSR over the last 3 years was -44%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 8.5% in the twelve months, SHINSEGAE shareholders did even worse, losing 19% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. 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. 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 4 warning signs for SHINSEGAE (1 is potentially serious!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.