Investors more bullish on Mona YongpyongLtd (KRX:070960) this week as stock spikes 11%, despite earnings trending downwards over past year

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Mona Yongpyong Co.,Ltd (KRX:070960) share price is 42% higher than it was a year ago, much better than the market decline of around 12% (not including dividends) in the same period. So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 21% in the last three years.

The past week has proven to be lucrative for Mona YongpyongLtd investors, so let's see if fundamentals drove the company's one-year performance.

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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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year, Mona YongpyongLtd actually saw its earnings per share drop 20%.

This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

However the year on year revenue growth of 27% would help. We do see some companies suppress earnings in order to accelerate revenue growth.

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

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

A Different Perspective

We're pleased to report that Mona YongpyongLtd shareholders have received a total shareholder return of 42% over one year. That's better than the annualised return of 0.4% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should learn about the 3 warning signs we've spotted with Mona YongpyongLtd (including 2 which are a bit concerning) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.