Shinsung E&GLtd (KRX:011930) pops 21% this week, taking five-year gains to 81%

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Shinsung E&G Co.,Ltd. (KRX:011930) shareholders have enjoyed a 81% share price rise over the last half decade, well in excess of the market return of around 29% (not including dividends).

Since the stock has added ₩55b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

We've discovered 1 warning sign about Shinsung E&GLtd. View them for free.

Given that Shinsung E&GLtd didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Shinsung E&GLtd can boast revenue growth at a rate of 9.3% per year. That's a fairly respectable growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 13% full reflects the underlying business growth. The key question is whether revenue growth will slow down, and if so, how quickly. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.

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

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

A Different Perspective

We regret to report that Shinsung E&GLtd shareholders are down 24% for the year. Unfortunately, that's worse than the broader market decline of 5.3%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Shinsung E&GLtd better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Shinsung E&GLtd you should be aware of.

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

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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.