Despite lower earnings than five years ago, Kumho Petro ChemicalLtd (KRX:011780) investors are up 146% since then

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Kumho Petro Chemical Co.,Ltd (KRX:011780) which saw its share price drive 108% higher over five years. On the other hand, the stock price has retraced 6.5% in the last week.

In light of the stock dropping 6.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for Kumho Petro ChemicalLtd

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Kumho Petro ChemicalLtd actually saw its EPS drop 1.8% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. 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.

The modest 2.0% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 7.9% per year is probably viewed as evidence that Kumho Petro ChemicalLtd is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Kumho Petro ChemicalLtd is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Kumho Petro ChemicalLtd in this interactive graph of future profit estimates.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Kumho Petro ChemicalLtd, it has a TSR of 146% 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

It's good to see that Kumho Petro ChemicalLtd has rewarded shareholders with a total shareholder return of 18% in the last twelve months. That's including the dividend. Having said that, the five-year TSR of 20% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Kumho Petro ChemicalLtd better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Kumho Petro ChemicalLtd you should be aware of.

But note: Kumho Petro ChemicalLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.