Englewood Lab (KOSDAQ:950140) shareholder returns have been fantastic, earning 418% in 5 years

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. To wit, the Englewood Lab, Inc. (KOSDAQ:950140) share price has soared 414% over five years. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 70% in about a quarter.

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

See our latest analysis for Englewood Lab

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years of share price growth, Englewood Lab moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Englewood Lab share price is up 168% in the last three years. In the same period, EPS is up 76% per year. This EPS growth is higher than the 39% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Englewood Lab's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Englewood Lab hasn't been paying dividends, but its TSR of 418% exceeds its share price return of 414%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

It's nice to see that Englewood Lab shareholders have received a total shareholder return of 160% over the last year. That's better than the annualised return of 39% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 example, we've discovered 1 warning sign for Englewood Lab that you should be aware of before investing here.

But note: Englewood Lab 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.

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