Investors bid Union (KRX:000910) up ₩8.7b despite increasing losses YoY, taking five-year CAGR to 7.8%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Union Corporation (KRX:000910) share price is up 30% in the last 5 years, clearly besting the market return of around 22% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 6.4% in the last year, including dividends.

Since the stock has added ₩8.7b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Union

Given that Union didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Union can boast revenue growth at a rate of 3.0% per year. That's not a very high growth rate considering the bottom line. The modest growth is probably broadly reflected in the share price, which is up 5%, per year over 5 years. We'd be looking for the underlying business to grow revenue a bit faster.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Union the TSR over the last 5 years was 45%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Union shareholders have received a total shareholder return of 6.4% over one year. That's including the dividend. However, that falls short of the 8% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Union better, we need to consider many other factors. Even so, be aware that Union is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.