Fine Semitech's (KOSDAQ:036810) three-year earnings growth trails the 45% YoY shareholder returns

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For instance the Fine Semitech Corp. (KOSDAQ:036810) share price is 202% higher than it was three years ago. That sort of return is as solid as granite. On top of that, the share price is up 58% in about a quarter.

Since the stock has added ₩67b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

We don't think that Fine Semitech's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over the last three years Fine Semitech has grown its revenue at 6.6% annually. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In contrast, the stock has popped 45% per year in that time - an impressive result. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. It seems likely that the market is pretty optimistic about Fine Semitech, given it is losing money.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Fine Semitech the TSR over the last 3 years was 205%, 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

We're pleased to report that Fine Semitech shareholders have received a total shareholder return of 71% over one year. And that does include the dividend. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should learn about the 3 warning signs we've spotted with Fine Semitech (including 2 which don't sit too well with us) .

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South Korean exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.