Is Zeus' (KOSDAQ:079370) 134% Share Price Increase Well Justified?

Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Zeus Co., Ltd. (KOSDAQ:079370) share price has soared 134% return in just a single year. It's also good to see the share price up 60% over the last quarter. Also impressive, the stock is up 69% over three years, making long term shareholders happy, too.

See our latest analysis for Zeus

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over the last twelve months, Zeus actually shrank its EPS by 29%.

So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We are skeptical of the suggestion that the 0.7% dividend yield would entice buyers to the stock. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Zeus' balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Zeus' TSR for the last year was 137%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Zeus has rewarded shareholders with a total shareholder return of 137% in the last twelve months. And that does include the dividend. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 4 warning signs for Zeus (2 are a bit concerning!) that you should be aware of before investing here.

We will like Zeus better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

When trading Zeus or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on 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@simplywallst.com.