The one-year shareholder returns and company earnings persist lower as STI (KOSDAQ:039440) stock falls a further 12% in past week

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by STI Co., Ltd. (KOSDAQ:039440) shareholders over the last year, as the share price declined 31%. That's well below the market return of 11%. Longer term investors have fared much better, since the share price is up 19% in three years. The share price has dropped 34% in three months.

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

See our latest analysis for STI

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unfortunately STI reported an EPS drop of 12% for the last year. The share price decline of 31% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders more nervous about the business.

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

It is of course excellent to see how STI has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Investors in STI had a tough year, with a total loss of 30% (including dividends), against a market gain of about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with STI , and understanding them should be part of your investment process.

But note: STI 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.