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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For example, the Gran Colombia Gold Corp. (TSE:GCM) share price has soared 121% in the last three years. How nice for those who held the stock! It's also good to see the share price up 22% over the last quarter.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over the last three years, Gran Colombia Gold failed to grow earnings per share, which fell 1.7% (annualized). In this instance, recent extraordinary items impacted the earnings. Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Gran Colombia Gold at the moment. So other metrics may hold the key to understanding what is influencing investors.
It may well be that Gran Colombia Gold revenue growth rate of 22% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Gran Colombia Gold's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Gran Colombia Gold has rewarded shareholders with a total shareholder return of 46% in the last twelve months. Notably the five-year annualised TSR loss of 31% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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.
Of course Gran Colombia Gold may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.