If You Had Bought Avaco (KOSDAQ:083930) Stock A Year Ago, You Could Pocket A 254% Gain Today

Avaco Co., Ltd. (KOSDAQ:083930) shareholders have seen the share price descend 10% over the month. Despite this, the stock is a strong performer over the last year, no doubt about that. During that period, the share price soared a full 254%. So some might not be surprised to see the price retrace some. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

Check out our latest analysis for Avaco

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the last twelve months, Avaco actually shrank its EPS by 2.2%.

Sometimes companies will sacrifice EPS in the short term for longer term gains; and in that case we may be able to find other positives. It makes sense to check some of the other fundamental data for an explanation of the share price rise.

Avaco's revenue actually dropped 20% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Avaco stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Avaco the TSR over the last year was 264%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Avaco shareholders have received a total shareholder return of 264% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 23% 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. 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. Take risks, for example - Avaco has 1 warning sign we think you should be aware of.

But note: Avaco may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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