Does Ajinextek's (KOSDAQ:059120) Share Price Gain of 71% Match Its Business Performance?

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. For example, the Ajinextek Co., Ltd. (KOSDAQ:059120) share price is up 71% in the last year, clearly besting the market return of around 51% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 23% lower than it was three years ago.

View our latest analysis for Ajinextek

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Ajinextek was able to grow EPS by 374% in the last twelve months. It's fair to say that the share price gain of 71% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Ajinextek as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 8.97.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Ajinextek's key metrics by checking this interactive graph of Ajinextek's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Ajinextek's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Ajinextek's TSR, at 74% is higher than its share price return of 71%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

We're pleased to report that Ajinextek shareholders have received a total shareholder return of 74% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 1 warning sign for Ajinextek that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

If you’re looking to trade Ajinextek, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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