VT (KOSDAQ:018290) stock performs better than its underlying earnings growth over last three years

For us, stock picking is in large part the hunt for the truly magnificent stocks. Not every pick can be a winner, but when you pick the right stock, you can win big. Take, for example, the VT Co., Ltd. (KOSDAQ:018290) share price, which skyrocketed 372% over three years. And in the last week the share price has popped 19%.

Since the stock has added ₩202b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for VT

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).

During three years of share price growth, VT achieved compound earnings per share growth of 58% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 68% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Au contraire, the share price change has arguably mimicked the EPS growth.

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

It is of course excellent to see how VT has grown profits over the years, but the future is more important for shareholders. This free interactive report on VT's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that VT shareholders have received a total shareholder return of 126% over one year. That's better than the annualised return of 32% 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. 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. Take risks, for example - VT has 1 warning sign we think you should be aware of.

But note: VT may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.