Despite the downward trend in earnings at SK-ElectronicsLTD (TSE:6677) the stock jumps 11%, bringing three-year gains to 223%

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. For example, the SK-Electronics CO.,LTD. (TSE:6677) share price has soared 181% in the last three years. That sort of return is as solid as granite. And in the last month, the share price has gained 15%. We note that SK-ElectronicsLTD reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.

The past week has proven to be lucrative for SK-ElectronicsLTD investors, so let's see if fundamentals drove the company's three-year performance.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over the last three years, SK-ElectronicsLTD failed to grow earnings per share, which fell 6.1% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.

We severely doubt anyone is particularly impressed with the modest 1.4% three-year revenue growth rate. While we don't have an obvious theory to explain the share price rise, a closer look at the data might be enlightening.

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

We know that SK-ElectronicsLTD has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling SK-ElectronicsLTD stock, you should check out this free report showing analyst profit forecasts.

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, SK-ElectronicsLTD's TSR for the last 3 years was 223%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that SK-ElectronicsLTD shareholders have received a total shareholder return of 67% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 26%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - SK-ElectronicsLTD has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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