Sungdo Engineering & Construction's (KOSDAQ:037350) three-year earnings growth trails the 19% YoY shareholder returns
Buying a low-cost index fund will get you the average market return. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Sungdo Engineering & Construction Co., Ltd. (KOSDAQ:037350) share price. It's up 58% over three years, but that is below the market return. On the other hand, the more recent gain of 48% over a year is certainly pleasing.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years of share price growth, Sungdo Engineering & Construction achieved compound earnings per share growth of 14% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 16% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Sungdo Engineering & Construction'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 Sungdo Engineering & Construction the TSR over the last 3 years was 69%, 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
Sungdo Engineering & Construction shareholders are up 48% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 11% 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. Take risks, for example - Sungdo Engineering & Construction has 2 warning signs we think you should be aware of.
Of course Sungdo Engineering & Construction 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 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.