Update: GOLFZON (KOSDAQ:215000) Stock Gained 41% In The Last Three Years

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at GOLFZON Co., Ltd. (KOSDAQ:215000), which is up 41%, over three years, soundly beating the market return of 18% (not including dividends).

Check out our latest analysis for GOLFZON

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years of share price growth, GOLFZON actually saw its earnings per share (EPS) drop 30% per year.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.

It may well be that GOLFZON revenue growth rate of 14% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.

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

We know that GOLFZON has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for GOLFZON in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for GOLFZON the TSR over the last 3 years was 58%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

GOLFZON shareholders are up 42% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 1.5% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand GOLFZON better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for GOLFZON you should know about.

Of course GOLFZON 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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