Dream Security (KOSDAQ:203650) shareholders notch a 33% return over 1 year, yet earnings have been shrinking

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Dream Security co., Ltd. (KOSDAQ:203650) share price is 33% higher than it was a year ago, much better than the market return of around 6.4% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! The longer term returns are positive, with the share price up 27% in three years.

The past week has proven to be lucrative for Dream Security investors, so let's see if fundamentals drove the company's one-year performance.

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There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Over the last twelve months, Dream Security actually shrank its EPS by 41%.

So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

However the year on year revenue growth of 16% would help. We do see some companies suppress earnings in order to accelerate revenue growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

A Different Perspective

It's good to see that Dream Security has rewarded shareholders with a total shareholder return of 33% in the last twelve months. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. 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. Even so, be aware that Dream Security is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

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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.