The 29% return delivered to Lotte WellfoodLtd's (KRX:280360) shareholders actually lagged YoY earnings growth

Lotte Wellfood Co.,Ltd (KRX:280360) shareholders might be concerned after seeing the share price drop 27% in the last quarter. But that doesn't change the fact that the returns over the last year have been pleasing. To wit, it had solidly beat the market, up 26%.

Since the stock has added ₩101b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Lotte WellfoodLtd

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.

Lotte WellfoodLtd was able to grow EPS by 261% in the last twelve months. This EPS growth is significantly higher than the 26% increase in the share price. Therefore, it seems the market isn't as excited about Lotte WellfoodLtd as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.38.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Lotte WellfoodLtd has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Lotte WellfoodLtd will grow revenue in the future.

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, Lotte WellfoodLtd's TSR for the last 1 year was 29%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Lotte WellfoodLtd shareholders have received a total shareholder return of 29% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.6% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Lotte WellfoodLtd , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.