Daesung Energy's (KRX:117580) five-year total shareholder returns outpace the underlying earnings growth

The Daesung Energy Co., Ltd. (KRX:117580) share price has had a bad week, falling 11%. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 55% in that time.

In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for Daesung Energy

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the last half decade, Daesung Energy became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

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

Dive deeper into Daesung Energy's key metrics by checking this interactive graph of Daesung Energy's earnings, revenue and cash flow.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Daesung Energy the TSR over the last 5 years was 86%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Daesung Energy's TSR for the year was broadly in line with the market average, at 7.1%. We should note here that the five-year TSR is more impressive, at 13% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Daesung Energy a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand Daesung Energy better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Daesung Energy (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

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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.