BH (KRX:090460) earnings and shareholder returns have been trending downwards for the last five years, but the stock rallies 12% this past week

This week we saw the BH Co., Ltd. (KRX:090460) share price climb by 12%. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 30%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added ₩55b to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Check out our latest analysis for BH

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years over which the share price declined, BH's earnings per share (EPS) dropped by 3.7% each year. This reduction in EPS is less than the 7% annual reduction in the share price. This implies that the market is more cautious about the business these days. The low P/E ratio of 6.08 further reflects this reticence.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that BH has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on BH's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, BH's TSR for the last 5 years was -26%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 4.0% in the twelve months, BH shareholders did even worse, losing 8.0% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Is BH cheap compared to other companies? These 3 valuation measures might help you decide.

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.