It is a pleasure to report that the Resolute Mining Limited (ASX:RSG) is up 111% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been disappointing. Indeed, the share price is down 64% in the period. So is the recent increase sufficient to restore confidence in the stock? Not yet. But it could be that the fall was overdone.
While the last five years has been tough for Resolute Mining shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
Given that Resolute Mining didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over five years, Resolute Mining grew its revenue at 13% per year. That's a pretty good rate for a long time period. The share price return isn't so respectable with an annual loss of 10% over the period. That suggests the market is disappointed with the current growth rate. That could lead to an opportunity if the company is going to become profitable sooner rather than later.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Resolute Mining's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Resolute Mining's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Resolute Mining's TSR of was a loss of 60% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
We're pleased to report that Resolute Mining shareholders have received a total shareholder return of 62% over one year. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 1 warning sign for Resolute Mining you should know about.
For those who like to find winning investments this free list of growing 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 Australian 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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