Kmw (KOSDAQ:032500) swells 10% this week, taking one-year gains to 81%

It's always best to build a diverse portfolio of shares, since any stock business could lag the broader market. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is Kmw Inc. (KOSDAQ:032500), which saw its share price increase 81% in the last year, slightly above the market return of around 73% (not including dividends). Zooming out, the stock is actually down 42% in the last three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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Kmw wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year Kmw saw its revenue grow by 18%. We respect that sort of growth, no doubt. While the share price performed well, gaining 81% over twelve months, you could argue the revenue growth warranted it. If the company can maintain the revenue growth, the share price could go higher still. But it's crucial to check profitability and cash flow before forming a view on the future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Kmw's financial health with this free report on its balance sheet.

A Different Perspective

Kmw shareholders have received returns of 81% over twelve months, which isn't far from the general market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 13%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for Kmw. 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. For example, we've discovered 2 warning signs for Kmw (1 doesn't sit too well with us!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.