Even though Posco Future M (KRX:003670) has lost ₩1.7t market cap in last 7 days, shareholders are still up 69% over 5 years

The Posco Future M Co., Ltd. (KRX:003670) share price has had a bad week, falling 12%. On the bright side the returns have been quite good over the last half decade. Its return of 56% has certainly bested the market return! While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 44% drop, in the last year.

Although Posco Future M has shed ₩1.7t from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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Given that Posco Future M didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Posco Future M can boast revenue growth at a rate of 21% per year. Even measured against other revenue-focussed companies, that's a good result. While the compound gain of 9% per year is good, it's not unreasonable given the strong revenue growth. If you think there could be more growth to come, now might be the time to take a close look at Posco Future M. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

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

Posco Future M is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Posco Future M in this interactive graph of future profit estimates.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Posco Future M the TSR over the last 5 years was 69%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Posco Future M shareholders are down 42% for the year (even including dividends), but the market itself is up 17%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Posco Future M better, we need to consider many other factors. For instance, we've identified 2 warning signs for Posco Future M (1 shouldn't be ignored) that you should be aware of.

But note: Posco Future M may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.