How Much Have Daesung Energy (KRX:117580) Shareholders Earned On Their Investment Over The Last Five Years?

The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Daesung Energy Co., Ltd. (KRX:117580), since the last five years saw the share price fall 12%. The good news is that the stock is up 1.5% in the last week.

See 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.

Looking back five years, both Daesung Energy's share price and EPS declined; the latter at a rate of 0.5% per year. This reduction in EPS is less than the 3% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 10.54 further reflects this reticence.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Daesung Energy, it has a TSR of 8.8% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Daesung Energy shareholders are up 8.0% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 1.7% per year over five year. This suggests the company might be improving over time. 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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Daesung Energy (at least 1 which is concerning) , and understanding them should be part of your investment process.

But note: Daesung Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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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.
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