Does Doosan Bobcat's (KRX:241560) Share Price Gain of 27% Match Its Business Performance?

On average, over time, stock markets tend to rise higher. This makes investing attractive. But if when you choose to buy stocks, some of them will be below average performers. For example, the Doosan Bobcat Inc. (KRX:241560), share price is up over the last year, but its gain of 27% trails the market return. However, the longer term returns haven't been so impressive, with the stock up just 2.7% in the last three years.

View our latest analysis for Doosan Bobcat

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Over the last twelve months, Doosan Bobcat actually shrank its EPS by 34%.

Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

Unfortunately Doosan Bobcat's fell 3.8% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Doosan Bobcat is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Doosan Bobcat stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Doosan Bobcat, it has a TSR of 29% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Doosan Bobcat shareholders are up 29% for the year (even including dividends). It's always nice to make money but this return falls short of the market return which was about 48% for the year. On the bright side that gain is actually better than the average return of 4% over the last three years, implying that the company is doing better recently. If the business can justify the share price gain with improving fundamental data, then there could be more gains to come. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Doosan Bobcat that you should be aware of.

Of course Doosan Bobcat may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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’re looking to trade Doosan Bobcat, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide 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.