Positive earnings growth hasn't been enough to get Hanmi Science (KRX:008930) shareholders a favorable return over the last five years

Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. To wit, the Hanmi Science Co., Ltd. (KRX:008930) share price managed to fall 52% over five long years. That's not a lot of fun for true believers.

On a more encouraging note the company has added ₩81b to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the unfortunate half decade during which the share price slipped, Hanmi Science actually saw its earnings per share (EPS) improve by 39% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

The modest 1.1% dividend yield is unlikely to be guiding the market view of the stock. In contrast to the share price, revenue has actually increased by 10% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Hanmi Science stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Hanmi Science provided a TSR of 26% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. So this might be a sign the business has turned its fortunes around. Before deciding if you like the current share price, check how Hanmi Science scores on these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.