The 12% return this week takes Kolon's (KRX:002020) shareholders one-year gains to 301%

When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right stock, you can make a lot more than 100%. Take, for example Kolon Corporation (KRX:002020). Its share price is already up an impressive 286% in the last twelve months. And in the last month, the share price has gained 23%. We note that Kolon reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report. It is also impressive that the stock is up 123% over three years, adding to the sense that it is a real winner.

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

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over the last twelve months Kolon went from profitable to unprofitable. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. We might get a clue to explain the share price move by looking to other metrics.

We are skeptical of the suggestion that the 1.0% dividend yield would entice buyers to the stock. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

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

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Kolon, it has a TSR of 301% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Kolon has rewarded shareholders with a total shareholder return of 301% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 23% 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. It's always interesting to track share price performance over the longer term. But to understand Kolon better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Kolon (at least 2 which make us uncomfortable) , 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.