Cuckoo Holdings (KRX:192400) stock performs better than its underlying earnings growth over last three years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. To wit, the Cuckoo Holdings Co., Ltd. (KRX:192400) share price has flown 118% in the last three years. Most would be happy with that. It's also good to see the share price up 42% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 26% in 90 days).

Since the stock has added ₩82b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Cuckoo Holdings achieved compound earnings per share growth of 2.7% per year. This EPS growth is lower than the 30% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Cuckoo Holdings has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Cuckoo Holdings' TSR for the last 3 years was 158%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Cuckoo Holdings has rewarded shareholders with a total shareholder return of 55% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Cuckoo Holdings has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.