The three-year shareholder returns and company earnings persist lower as Lotte Energy Materials (KRX:020150) stock falls a further 7.4% in past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the last three years have been particularly tough on longer term Lotte Energy Materials Corporation (KRX:020150) shareholders. Unfortunately, they have held through a 65% decline in the share price in that time. More recently, the share price has dropped a further 13% in a month.

With the stock having lost 7.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Lotte Energy Materials

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During five years of share price growth, Lotte Energy Materials moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.

The modest 0.6% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 11% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Lotte Energy Materials further; while we may be missing something on this analysis, there might also be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Lotte Energy Materials is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Lotte Energy Materials will earn in the future (free analyst consensus estimates)

A Different Perspective

While the broader market gained around 9.9% in the last year, Lotte Energy Materials shareholders lost 0.7% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 1.2% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Lotte Energy Materials you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South Korean exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.