Dong A Eltek (KOSDAQ:088130) delivers shareholders 5.3% CAGR over 5 years, surging 24% in the last week alone

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But Dong A Eltek Co., Ltd. (KOSDAQ:088130) has fallen short of that second goal, with a share price rise of 16% over five years, which is below the market return. Looking at the last year alone, the stock is up 11%.

The past week has proven to be lucrative for Dong A Eltek investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Dong A Eltek

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. 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.

Dong A Eltek's earnings per share are down 55% per year, despite strong share price performance over five years.

The strong decline in earnings per share suggests the market isn't using EPS to judge the company. Given that EPS is down, but the share price is up, it seems clear the market is focussed on other aspects of the business, at the moment.

We doubt the modest 1.4% dividend yield is attracting many buyers to the stock. It is not great to see that revenue has dropped by 4.7% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Dong A Eltek stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Dong A Eltek, it has a TSR of 29% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Dong A Eltek shareholders have received a total shareholder return of 14% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Dong A Eltek better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Dong A Eltek (of which 1 is concerning!) you should know about.

Of course Dong A Eltek 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.