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Did Business Growth Power Jervois Mining's (ASX:JRV) Share Price Gain of 167%?

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Jervois Mining Limited (ASX:JRV) shareholders might understandably be very concerned that the share price has dropped 36% in the last quarter. In contrast, the return over three years has been impressive. In three years the stock price has launched 167% higher: a great result. It's not uncommon to see a share price retrace a bit, after a big gain. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

Check out our latest analysis for Jervois Mining

Jervois Mining wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 3 years Jervois Mining saw its revenue grow at 124% per year. That's well above most pre-profit companies. Meanwhile, the share price performance has been pretty solid at 39% compound over three years. But it does seem like the market is paying attention to strong revenue growth. Nonetheless, we'd say Jervois Mining is still worth investigating - successful businesses can often keep growing for long periods.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

ASX:JRV Income Statement April 27th 2020
ASX:JRV Income Statement April 27th 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Jervois Mining in this interactive graph of future profit estimates.

What about the Total Shareholder Return (TSR)?

We've already covered Jervois Mining's share price action, but we should also mention its total shareholder return (TSR). 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. Jervois Mining hasn't been paying dividends, but its TSR of 179% exceeds its share price return of 167%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

We regret to report that Jervois Mining shareholders are down 33% for the year. Unfortunately, that's worse than the broader market decline of 15%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For instance, we've identified 5 warning signs for Jervois Mining (2 make us uncomfortable) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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

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.

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. Thank you for reading.