Despite the downward trend in earnings at YBM Net (KOSDAQ:057030) the stock pops 27%, bringing one-year gains to 37%

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the YBM Net, Inc. (KOSDAQ:057030) share price is up 34% in the last 1 year, clearly besting the market decline of around 7.9% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! However, the longer term returns haven't been so impressive, with the stock up just 9.1% in the last three years.

Since the stock has added ₩19b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

We've discovered 4 warning signs about YBM Net. View them for free.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over the last twelve months, YBM Net actually shrank its EPS by 37%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We are skeptical of the suggestion that the 1.8% dividend yield would entice buyers to the stock. YBM Net's revenue actually dropped 3.6% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at YBM Net's financial health with this free report on its balance sheet.

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. We note that for YBM Net the TSR over the last 1 year was 37%, 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

We're pleased to report that YBM Net shareholders have received a total shareholder return of 37% over one year. That's including the dividend. Notably the five-year annualised TSR loss of 5% per year compares very unfavourably with the recent share price performance. 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. Even so, be aware that YBM Net is showing 4 warning signs in our investment analysis , you should know about...

Of course YBM Net 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 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.