One way to deal with stock volatility is to ensure you have a properly diverse portfolio. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is Newtree Co.,Ltd. (KOSDAQ:270870), which saw its share price increase 61% in the last year, slightly above the market return of around 51% (not including dividends). We'll need to follow NewtreeLtd for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
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.
NewtreeLtd was able to grow EPS by 211% in the last twelve months. It's fair to say that the share price gain of 61% did not keep pace with the EPS growth. So it seems like the market has cooled on NewtreeLtd, despite the growth. Interesting.
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 NewtreeLtd has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's nice to see that NewtreeLtd shareholders have gained 63% over the last year, including dividends. And the share price momentum remains respectable, with a gain of 29% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with NewtreeLtd (at least 1 which is concerning) , and understanding them should be part of your investment process.
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 KR exchanges.
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This article by Simply Wall St is general in nature. 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.
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