Taiwan Surface Mounting Technology (TWSE:6278) stock falls 7.2% in past week as three-year earnings and shareholder returns continue downward trend

Many investors define successful investing as beating the market average over the long term. 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 Taiwan Surface Mounting Technology Corp. (TWSE:6278) shareholders have had that experience, with the share price dropping 27% in three years, versus a market return of about 38%. The last week also saw the share price slip down another 7.2%.

Since Taiwan Surface Mounting Technology has shed NT$2.3b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Taiwan Surface Mounting Technology

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Taiwan Surface Mounting Technology saw its EPS decline at a compound rate of 2.8% per year, over the last three years. This reduction in EPS is slower than the 10% annual reduction in the share price. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 10.46.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Taiwan Surface Mounting Technology's key metrics by checking this interactive graph of Taiwan Surface Mounting Technology's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Taiwan Surface Mounting Technology the TSR over the last 3 years was -12%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Taiwan Surface Mounting Technology shareholders gained a total return of 14% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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. For example, we've discovered 1 warning sign for Taiwan Surface Mounting Technology that you should be aware of before investing here.

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 Taiwanese 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.