Optimism for KG Chemical (KRX:001390) has grown this past week, despite one-year decline in earnings

We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. For example, the KG Chemical Corporation (KRX:001390), share price is up over the last year, but its gain of 46% trails the market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 3.0% in three years.

The past week has proven to be lucrative for KG Chemical investors, so let's see if fundamentals drove the company's one-year performance.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year, KG Chemical actually saw its earnings per share drop 22%.

Given the share price gain, we doubt the market is measuring progress with EPS. 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.

Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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?

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. In the case of KG Chemical, it has a TSR of 51% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

KG Chemical shareholders are up 51% for the year (even including dividends). But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 9% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand KG Chemical better, we need to consider many other factors. Even so, be aware that KG Chemical is showing 2 warning signs in our investment analysis , you should know about...

Of course KG Chemical may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.