While shareholders of DREAMTECH (KRX:192650) are in the red over the last year, underlying earnings have actually grown

It's nice to see the DREAMTECH Co., Ltd. (KRX:192650) share price up 11% in a week. But that is minimal compensation for the share price under-performance over the last year. After all, the share price is down 34% in the last year, significantly under-performing the market.

On a more encouraging note the company has added ₩51b to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

See our latest analysis for DREAMTECH

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Even though the DREAMTECH share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.

The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.

DREAMTECH managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

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

We know that DREAMTECH has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think DREAMTECH will earn in the future (free profit forecasts).

A Different Perspective

While the broader market lost about 4.0% in the twelve months, DREAMTECH shareholders did even worse, losing 32% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for DREAMTECH you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.