Investors more bullish on KCTC (KRX:009070) this week as stock soars 22%, despite earnings trending downwards over past year

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if when you choose to buy stocks, some of them will be below average performers. Over the last year the KCTC Co. Ltd (KRX:009070) share price is up 65%, but that's less than the broader market return. And shareholders have also done well over the long term, with an increase of 37% in the last three years.

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

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year, KCTC actually saw its earnings per share drop 19%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We doubt the modest 1.2% dividend yield is doing much to support the share price. We think that the revenue growth of 13% could have some investors interested. We do see some companies suppress earnings in order to accelerate revenue growth.

The graphic below depicts how earnings and revenue have changed over time (unveil 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 Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of KCTC, it has a TSR of 68% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

KCTC shareholders have received returns of 68% over twelve months (even including dividends), which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 11% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand KCTC better, we need to consider many other factors. Even so, be aware that KCTC is showing 1 warning sign in our investment analysis , you should know about...

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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.