Investors in COWAY (KRX:021240) have seen notable returns of 55% over the past year

The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the COWAY Co., Ltd. (KRX:021240) share price is 51% higher than it was a year ago, much better than the market return of around 9.5% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 17% lower than it was three years ago.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for COWAY

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).

COWAY was able to grow EPS by 23% in the last twelve months. This EPS growth is significantly lower than the 51% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

We know that COWAY has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of COWAY, it has a TSR of 55% for the last 1 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

It's nice to see that COWAY shareholders have received a total shareholder return of 55% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. Case in point: We've spotted 2 warning signs for COWAY you should be aware of.

We will like COWAY better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.