If You Had Bought Incheon City Gas' (KRX:034590) Shares Three Years Ago You Would Be Down 17%

As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Incheon City Gas Co., Ltd. (KRX:034590) shareholders have had that experience, with the share price dropping 17% in three years, versus a market return of about 33%.

Check out our latest analysis for Incheon City Gas

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.

Incheon City Gas saw its EPS decline at a compound rate of 8.9% per year, over the last three years. This fall in the EPS is worse than the 6% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Incheon City Gas, it has a TSR of -5.0% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Incheon City Gas shareholders are up 1.0% for the year (even including dividends). But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 0.9% over half a decade This suggests the company might be improving over time. 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. For example, we've discovered 2 warning signs for Incheon City Gas (1 is potentially serious!) that you should be aware of before investing here.

Of course Incheon City Gas may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

If you’re looking to trade Incheon City Gas, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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