Australia markets closed
  • ALL ORDS

    7,413.10
    +73.80 (+1.01%)
     
  • ASX 200

    7,182.70
    +76.80 (+1.08%)
     
  • AUD/USD

    0.7163
    +0.0064 (+0.90%)
     
  • OIL

    115.07
    +0.98 (+0.86%)
     
  • GOLD

    1,850.60
    +3.00 (+0.16%)
     
  • BTC-AUD

    40,707.88
    +254.54 (+0.63%)
     
  • CMC Crypto 200

    625.79
    -3.71 (-0.59%)
     
  • AUD/EUR

    0.6670
    +0.0059 (+0.89%)
     
  • AUD/NZD

    1.0951
    +0.0003 (+0.03%)
     
  • NZX 50

    11,065.15
    -37.69 (-0.34%)
     
  • NASDAQ

    12,681.42
    +404.63 (+3.30%)
     
  • FTSE

    7,585.46
    +20.54 (+0.27%)
     
  • Dow Jones

    33,212.96
    +575.77 (+1.76%)
     
  • DAX

    14,462.19
    +230.90 (+1.62%)
     
  • Hang Seng

    20,697.36
    +581.16 (+2.89%)
     
  • NIKKEI 225

    26,781.68
    +176.84 (+0.66%)
     

Those who invested in Northern Star Resources (ASX:NST) five years ago are up 171%

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Northern Star Resources Limited (ASX:NST) shareholders would be well aware of this, since the stock is up 149% in five years.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Northern Star Resources

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Over half a decade, Northern Star Resources managed to grow its earnings per share at 26% a year. The EPS growth is more impressive than the yearly share price gain of 20% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.60 also suggests market apprehension.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Northern Star Resources' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Northern Star Resources, it has a TSR of 171% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 19% in the last year, Northern Star Resources shareholders lost 24% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 22%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Northern Star Resources better, we need to consider many other factors. Even so, be aware that Northern Star Resources is showing 3 warning signs in our investment analysis , and 2 of those make us uncomfortable...

Northern Star Resources is not the only stock that insiders are buying. 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 AU exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting