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Investors ignore increasing losses at NHN (KRX:181710) as stock jumps 9.3% this past week
If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. To wit, the NHN Corporation (KRX:181710) share price is 46% higher than it was a year ago, much better than the market return of around 6.4% (not including dividends) in the same period. So that should have shareholders smiling. However, the stock hasn't done so well in the longer term, with the stock only up 7.9% in three years.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
Because NHN 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. 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 year NHN saw its revenue grow by 5.4%. That's not a very high growth rate considering it doesn't make profits. In keeping with the revenue growth, the share price gained 46% in that time. While not a huge gain tht seems pretty reasonable. It could be worth keeping an eye on this one, especially if growth accelerates.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
NHN is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for NHN in this interactive graph of future profit estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for NHN the TSR over the last 1 year 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
It's nice to see that NHN shareholders have received a total shareholder return of 50% over the last year. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. For instance, we've identified 2 warning signs for NHN that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South Korean exchanges.
Valuation is complex, but we're here to simplify it.
Discover if NHN might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About KOSE:A181710
NHN
An IT company, provides gaming, payment, entertainment, IT, and advertisement solutions in South Korea and internationally.
Undervalued with adequate balance sheet.
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