HD Hyundai Energy SolutionsLtd (KRX:322000) delivers shareholders favorable 5.9% CAGR over 5 years, surging 21% in the last week alone

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term HD Hyundai Energy Solutions Co.,Ltd. (KRX:322000) shareholders have enjoyed a 31% share price rise over the last half decade, well in excess of the market return of around 12% (not including dividends).

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for HD Hyundai Energy SolutionsLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

HD Hyundai Energy SolutionsLtd's earnings per share are down 16% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on 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.

On the other hand, HD Hyundai Energy SolutionsLtd's revenue is growing nicely, at a compound rate of 8.3% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see below how earnings and revenue have changed over time (discover 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 The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between HD Hyundai Energy SolutionsLtd's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. HD Hyundai Energy SolutionsLtd's TSR of 33% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 2.4% in the twelve months, HD Hyundai Energy SolutionsLtd shareholders did even worse, losing 6.2%. 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 6%, 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with HD Hyundai Energy SolutionsLtd , and understanding them should be part of your investment process.

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.