Did You Miss MK Electron's (KOSDAQ:033160) 72% Share Price Gain?

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 MK Electron Co., Ltd. (KOSDAQ:033160) shareholders have enjoyed a 72% share price rise over the last half decade, well in excess of the market return of around 55% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 33% , including dividends .

See our latest analysis for MK Electron

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, MK Electron achieved compound earnings per share (EPS) growth of 3.7% per year. This EPS growth is lower than the 11% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 51.02.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on MK Electron's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, MK Electron's TSR for the last 5 years was 80%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

MK Electron provided a TSR of 33% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. It is possible that returns will improve along with the business fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that MK Electron is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

Of course MK Electron 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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