Did KCTC's (KRX:009070) Share Price Deserve to Gain 43%?

It might be of some concern to shareholders to see the KCTC Co. Ltd (KRX:009070) share price down 13% in the last month. But over three years, the returns would have left most investors smiling In fact, the company's share price bested the return of its market index in that time, posting a gain of 43%.

View our latest analysis for KCTC

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

KCTC was able to grow its EPS at 13% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 13% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Quite to the contrary, the share price has arguably reflected the EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into KCTC's key metrics by checking this interactive graph of KCTC's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, KCTC's TSR for the last 3 years was 49%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

KCTC shareholders are up 31% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 5% per year over five year. It is possible that returns will improve along with the business fundamentals. 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 3 warning signs with KCTC (at least 1 which is significant) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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