Investors three-year losses continue as LG Innotek (KRX:011070) dips a further 4.1% this week, earnings continue to decline

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term LG Innotek Co., Ltd. (KRX:011070) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 59% share price collapse, in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 37% lower in that time. More recently, the share price has dropped a further 13% in a month.

With the stock having lost 4.1% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

We've discovered 1 warning sign about LG Innotek. View them for free.

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).

During the three years that the share price fell, LG Innotek's earnings per share (EPS) dropped by 20% each year. This reduction in EPS is slower than the 26% annual reduction in the share price. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 7.35.

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

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

A Different Perspective

While the broader market lost about 5.2% in the twelve months, LG Innotek shareholders did even worse, losing 36% (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. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand LG Innotek better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with LG Innotek , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.