Kolon Industries' (KRX:120110) Stock Price Has Reduced 52% In The Past Three Years

While it may not be enough for some shareholders, we think it is good to see the Kolon Industries, Inc. (KRX:120110) share price up 15% in a single quarter. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 52% in that time. So it is really good to see an improvement. The rise has some hopeful, but turnarounds are often precarious.

Check out our latest analysis for Kolon Industries

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.

Although the share price is down over three years, Kolon Industries actually managed to grow EPS by 3.5% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. However, taking a look at other business metrics might shed a bit more light on the share price action.

Arguably the revenue decline of 3.3% per year has people thinking Kolon Industries is shrinking. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Kolon Industries has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Kolon Industries

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Kolon Industries the TSR over the last 3 years was -50%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 34% in the last year, Kolon Industries shareholders lost 15% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Kolon Industries 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 Kolon Industries (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.

But note: Kolon Industries 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 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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