Daejoo Electronic Materials' (KOSDAQ:078600) underlying earnings growth outpaced the decent return generated for shareholders over the past five years

While Daejoo Electronic Materials Co., Ltd. (KOSDAQ:078600) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 30% in the last quarter. Looking further back, the stock has generated good profits over five years. Its return of 89% 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 53% drop, in the last year.

Since the long term performance has been good but there's been a recent pullback of 7.2%, let's check if the fundamentals match the share price.

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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 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.

Over half a decade, Daejoo Electronic Materials managed to grow its earnings per share at 117% a year. This EPS growth is higher than the 14% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Daejoo Electronic Materials has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

Daejoo Electronic Materials shareholders are down 53% for the year (even including dividends), but the market itself is up 4.9%. 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. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Daejoo Electronic Materials better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Daejoo Electronic Materials you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.