DB HiTek's (KRX:000990) earnings growth rate lags the 19% CAGR delivered to shareholders

Simply Wall St · 10/18 21:19

While DB HiTek CO., LTD. (KRX:000990) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 30% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 125% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.

While the stock has fallen 4.6% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for DB HiTek

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, DB HiTek achieved compound earnings per share (EPS) growth of 18% per year. That makes the EPS growth particularly close to the yearly share price growth of 18%. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

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

earnings-per-share-growth
KOSE:A000990 Earnings Per Share Growth October 18th 2024

Dive deeper into DB HiTek's key metrics by checking this interactive graph of DB HiTek'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, DB HiTek's TSR for the last 5 years was 141%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 8.3% in the last year, DB HiTek shareholders lost 22% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 19% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand DB HiTek better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for DB HiTek you should be aware of.

We will like DB HiTek better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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