Hyundai MobisLtd's (KRX:012330) three-year earnings growth trails the 22% YoY shareholder returns

Investors can buy low cost index fund if they want to receive the average market return. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the Hyundai Mobis Co.,Ltd (KRX:012330) share price is up 72% in the last three years, that falls short of the market return. Having said that, the 50% increase over the past year is good to see.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Hyundai MobisLtd achieved compound earnings per share growth of 22% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 20% 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).

We know that Hyundai MobisLtd has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Hyundai MobisLtd's TSR for the last 3 years was 80%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Hyundai MobisLtd shareholders are up 53% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This suggests the company might be improving over time. Before forming an opinion on Hyundai MobisLtd you might want to consider these 3 valuation metrics.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.