Investors more bullish on Kossan Rubber Industries Bhd (KLSE:KOSSAN) this week as stock rises 8.2%, despite earnings trending downwards over past year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Kossan Rubber Industries Bhd (KLSE:KOSSAN) share price is 57% higher than it was a year ago, much better than the market return of around 9.7% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Zooming out, the stock is actually down 42% in the last three years.

Since it's been a strong week for Kossan Rubber Industries Bhd shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Kossan Rubber Industries Bhd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Kossan Rubber Industries Bhd went from making a loss to reporting a profit, in the last year.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

We doubt the modest 0.9% dividend yield is doing much to support the share price. Unfortunately Kossan Rubber Industries Bhd's fell 32% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

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

Kossan Rubber Industries Bhd is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Kossan Rubber Industries Bhd in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that Kossan Rubber Industries Bhd shareholders have received a total shareholder return of 59% over the last year. That's including the dividend. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that Kossan Rubber Industries Bhd is showing 2 warning signs in our investment analysis , you should know about...

But note: Kossan Rubber Industries Bhd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian 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.