Hankuk Steel Wire (KOSDAQ:025550) spikes 12% this week, taking five-year gains to 49%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Hankuk Steel Wire Co., Ltd. (KOSDAQ:025550) shareholders have enjoyed a 42% share price rise over the last half decade, well in excess of the market return of around 12% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 14% in the last year.

Since it's been a strong week for Hankuk Steel Wire shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Hankuk Steel Wire

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Hankuk Steel Wire actually saw its EPS drop 16% per year.

This means it's unlikely the market is judging the company based on earnings growth. 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.

In contrast revenue growth of 6.9% per year is probably viewed as evidence that Hankuk Steel Wire is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Hankuk Steel Wire's financial health with this free report on its balance sheet.

What About The Total Shareholder Return (TSR)?

We've already covered Hankuk Steel Wire's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Hankuk Steel Wire's TSR of 49% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

It's nice to see that Hankuk Steel Wire shareholders have received a total shareholder return of 14% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Hankuk Steel Wire better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Hankuk Steel Wire (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.