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If You Had Bought Champion Iron (ASX:CIA) Shares Five Years Ago You'd Have Made 1033%

It hasn't been the best quarter for Champion Iron Limited (ASX:CIA) shareholders, since the share price has fallen 18% in that time. But that doesn't change the fact that the returns over the last half decade have been spectacular. Indeed, the share price is up a whopping 1033% in that time. So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

Anyone who held for that rewarding ride would probably be keen to talk about it.

See our latest analysis for Champion Iron

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the five years of share price growth, Champion Iron moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

ASX:CIA Past and Future Earnings, November 6th 2019
ASX:CIA Past and Future Earnings, November 6th 2019

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Champion Iron's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Champion Iron shareholders have received a total shareholder return of 60% over the last year. However, that falls short of the 63% TSR per annum it has made for shareholders, each year, over five years. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

Champion Iron is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.