Youlchon ChemicalLtd (KRX:008730) delivers shareholders strong 16% CAGR over 5 years, surging 17% in the last week alone

Youlchon Chemical Co.,Ltd. (KRX:008730) shareholders might be concerned after seeing the share price drop 11% in the last quarter. On the bright side the returns have been quite good over the last half decade. After all, the share price is up a market-beating 96% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 26% decline over the last twelve months.

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

We've discovered 3 warning signs about Youlchon ChemicalLtd. View them for free.

Because Youlchon ChemicalLtd made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last 5 years Youlchon ChemicalLtd saw its revenue shrink by 5.2% per year. Even though revenue hasn't increased, the stock actually gained 14%, per year, during the same period. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

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?

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Youlchon ChemicalLtd, it has a TSR of 111% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Youlchon ChemicalLtd shareholders are down 25% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 9.7%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 3 warning signs for Youlchon ChemicalLtd you should be aware of, and 2 of them don't sit too well with us.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.