The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. For example, the N.I Steel Co.,Ltd (KRX:008260) share price is up 86% in the last year, clearly besting the market return of around 51% (not including dividends). So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 7.3% higher than it was three years ago.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, N.I SteelLtd actually saw its earnings per share drop 10.0%.
Given the share price gain, we doubt the market is measuring progress with EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
However the year on year revenue growth of 18% would help. We do see some companies suppress earnings in order to accelerate revenue growth.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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 the Total Shareholder Return (TSR)?
We've already covered N.I SteelLtd'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. Its history of dividend payouts mean that N.I SteelLtd's TSR of 90% over the last year is better than the share price return.
A Different Perspective
We're pleased to report that N.I SteelLtd shareholders have received a total shareholder return of 90% over one year. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand N.I SteelLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with N.I SteelLtd (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
Of course N.I SteelLtd 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 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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