Investors ignore increasing losses at Keyang Electric Machinery (KRX:012200) as stock jumps 54% this past week

Active investing isn't easy, but for those that do it, the aim is to find the best companies to buy, and to profit handsomely. When you buy and hold the right company, the returns can make a huge difference to both you and your family. For example, Keyang Electric Machinery Co., Ltd. (KRX:012200) has generated a beautiful 378% return in just a single year. Shareholders are also celebrating an even better 449% rise, over the last three months. It is also impressive that the stock is up 105% over three years, adding to the sense that it is a real winner.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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Keyang Electric Machinery 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Keyang Electric Machinery grew its revenue by 1.2% last year. That's not a very high growth rate considering it doesn't make profits. So it's truly surprising that the share price rocketed 378% in a single year. It's great to see that some have made big profits, but we aren't so sure that the increase is justified. It just goes to show that big money can be made if you buy the right stock early.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's nice to see that Keyang Electric Machinery shareholders have received a total shareholder return of 378% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 30%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 risks, for instance. Every company has them, and we've spotted 3 warning signs for Keyang Electric Machinery you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.