The 38% return this week takes GL Pharm Tech's (KOSDAQ:204840) shareholders five-year gains to 67%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term GL Pharm Tech Corp. (KOSDAQ:204840) shareholders have enjoyed a 67% share price rise over the last half decade, well in excess of the market return of around 28% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 19% in the last year.

Since the stock has added ₩30b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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Given that GL Pharm Tech 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, GL Pharm Tech can boast revenue growth at a rate of 24% per year. That's well above most pre-profit companies. It's good to see that the stock has 11%, but not entirely surprising given revenue shows strong growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's nice to see that GL Pharm Tech shareholders have received a total shareholder return of 19% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand GL Pharm Tech better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with GL Pharm Tech (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Of course GL Pharm Tech 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 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.