Swelling losses haven't held back gains for Cosmo Chemical (KRX:005420) shareholders since they're up 54% over 5 years
Cosmo Chemical Co., Ltd. (KRX:005420) shareholders might be concerned after seeing the share price drop 11% in the last month. But the silver lining is the stock is up over five years. Unfortunately its return of 48% is below the market return of 60%. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 31% in the last three years.
Although Cosmo Chemical has shed ₩72b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Because Cosmo Chemical made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
For the last half decade, Cosmo Chemical can boast revenue growth at a rate of 13% per year. That's a fairly respectable growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 8% full reflects the underlying business growth. The key question is whether revenue growth will slow down, and if so, how quickly. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Cosmo Chemical's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Cosmo Chemical's total shareholder return (TSR) and its share price change, which we've covered above. 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. Cosmo Chemical hasn't been paying dividends, but its TSR of 54% exceeds its share price return of 48%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
While the broader market gained around 63% in the last year, Cosmo Chemical shareholders lost 3.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. 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. It's always interesting to track share price performance over the longer term. But to understand Cosmo Chemical better, we need to consider many other factors. Even so, be aware that Cosmo Chemical is showing 2 warning signs in our investment analysis , you should know about...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
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.