Introducing GMB KOREA (KRX:013870), A Stock That Climbed 71% In The Last Five Years

GMB KOREA Corp. (KRX:013870) shareholders might be concerned after seeing the share price drop 15% in the last month. While that's not great, the returns over five years have been decent. The share price is up 71%, which is better than the market return of 69%.

Check out our latest analysis for GMB KOREA

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, GMB KOREA actually saw its EPS drop 50% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We doubt the modest 0.4% dividend yield is attracting many buyers to the stock. The revenue reduction of 1.0% per year is not a positive. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at GMB KOREA's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for GMB KOREA the TSR over the last 5 years was 81%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

GMB KOREA shareholders have received returns of 52% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 13%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand GMB KOREA better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with GMB KOREA , and understanding them should be part of your investment process.

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 KR exchanges.

If you decide to trade GMB KOREA, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.