Yahoo Finance Investors in Mineral Resources (ASX:MIN) have made a incredible return of 536% over the past three years
For us, stock picking is in large part the hunt for the truly magnificent stocks. You won't get it right every time, but when you do, the returns can be truly splendid. For example, the Mineral Resources Limited (ASX:MIN) share price is up a whopping 468% in the last three years, a handsome return for long term holders. Also pleasing for shareholders was the 55% gain in the last three months.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Mineral Resources
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Mineral Resources achieved compound earnings per share growth of 29% per year. In comparison, the 78% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Mineral Resources the TSR over the last 3 years was 536%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Mineral Resources has rewarded shareholders with a total shareholder return of 75% in the last twelve months. And that does include the dividend. That's better than the annualised return of 37% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Mineral Resources (of which 1 doesn't sit too well with us!) you should know about.
We will like Mineral Resources better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
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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.
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