Update: King's Town Construction (TPE:2524) Stock Gained 96% In The Last Five Years

Passive investing in index funds can generate returns that roughly match the overall market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the King's Town Construction Co., Ltd. (TPE:2524) share price is 96% higher than it was five years ago, which is more than the market average. Zooming in, the stock is up a respectable 18% in the last year.

See our latest analysis for King's Town Construction

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

During five years of share price growth, King's Town Construction achieved compound earnings per share (EPS) growth of 29% per year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 7.91 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between King's Town Construction's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that King's Town Construction's TSR of 114% over the last 5 years is better than the share price return.

A Different Perspective

King's Town Construction shareholders gained a total return of 18% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 16% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand King's Town Construction better, we need to consider many other factors. Take risks, for example - King's Town Construction has 1 warning sign we think you should be aware of.

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 TW 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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