The 16% return this week takes Daechang Solution's (KOSDAQ:096350) shareholders five-year gains to 43%

Passive investing in index funds can generate returns that roughly match the overall market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Daechang Solution Co., Ltd. (KOSDAQ:096350) share price is up 43% in the last five years, slightly above the market return. It's also good to see that the stock is up 12% in a year.

Since it's been a strong week for Daechang Solution shareholders, let's have a look at trend of the longer term fundamentals.

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Daechang Solution wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 5 years Daechang Solution saw its revenue grow at 4.0% per year. That's not a very high growth rate considering the bottom line. While it's hard to say just how much value the company added over five years, the annualised share price gain of 7% seems about right. The business could be one worth watching but we generally prefer faster revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

It's nice to see that Daechang Solution shareholders have received a total shareholder return of 12% over the last year. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Daechang Solution , and understanding them should be part of your investment process.

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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.