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Did You Manage To Avoid Dynacor Gold Mines's (TSE:DNG) 37% Share Price Drop?

Simply Wall St

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Dynacor Gold Mines Inc. (TSE:DNG) shareholders have had that experience, with the share price dropping 37% in three years, versus a market return of about 16%. Even worse, it's down 9.0% in about a month, which isn't fun at all.

See our latest analysis for Dynacor Gold Mines

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate three years of share price decline, Dynacor Gold Mines actually saw its earnings per share (EPS) improve by 15% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Revenue is actually up 4.1% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Dynacor Gold Mines further; while we may be missing something on this analysis, there might also be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

TSX:DNG Income Statement, January 12th 2020

If you are thinking of buying or selling Dynacor Gold Mines stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Dynacor Gold Mines's TSR for the last 3 years was -35%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Dynacor Gold Mines shareholders are down 2.3% for the year (even including dividends) , but the market itself is up 14%. 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. On the bright side, long term shareholders have made money, with a gain of 0.5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you are like me, then you will 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 CA 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.