Samsung Electro-Mechanics (KRX:009150) investors are sitting on a loss of 20% if they invested three years ago

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Samsung Electro-Mechanics Co., Ltd. (KRX:009150) shareholders, since the share price is down 23% in the last three years, falling well short of the market decline of around 3.8%. More recently, the share price has dropped a further 11% in a month. We do note, however, that the broader market is down 5.2% in that period, and this may have weighed on the share price.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Samsung Electro-Mechanics saw its EPS decline at a compound rate of 16% per year, over the last three years. In comparison the 8% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

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

We know that Samsung Electro-Mechanics has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Samsung Electro-Mechanics the TSR over the last 3 years was -20%, 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 5.1% in the twelve months, Samsung Electro-Mechanics shareholders did even worse, losing 16% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 3%, 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 Samsung Electro-Mechanics better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Samsung Electro-Mechanics you should know about.

But note: Samsung Electro-Mechanics 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.