SKC (KRX:011790) pulls back 8.3% this week, but still delivers shareholders 4.2% CAGR over 5 years

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But SKC Co., Ltd. (KRX:011790) has fallen short of that second goal, with a share price rise of 20% over five years, which is below the market return. Zooming in, the stock is actually down 6.9% in the last year.

Since the long term performance has been good but there's been a recent pullback of 8.3%, let's check if the fundamentals match the share price.

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Given that SKC 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 5 years SKC saw its revenue shrink by 12% per year. The falling revenue is arguably somewhat reflected in the lacklustre return of 4% per year over that time. That's pretty decent given the top line decline, and lack of profits. Of course, a closer look at the bottom line - and any available analyst forecasts - could reveal an opportunity (if they point to future growth).

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

SKC is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for SKC in this interactive graph of future profit estimates.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between SKC's total shareholder return (TSR) and its share price return. 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. SKC's TSR of 23% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

While the broader market gained around 54% in the last year, SKC shareholders lost 6.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with SKC , and understanding them should be part of your investment process.

But note: SKC 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.