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If You Had Bought North American Palladium (TSE:PDL) Stock Three Years Ago, You Could Pocket A 236% Gain Today

Simply Wall St

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For instance the North American Palladium Ltd. (TSE:PDL) share price is 236% higher than it was three years ago. How nice for those who held the stock! On top of that, the share price is up 20% in about a quarter.

Check out our latest analysis for North American Palladium

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 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.

During three years of share price growth, North American Palladium moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

TSX:PDL Past and Future Earnings, October 1st 2019
TSX:PDL Past and Future Earnings, October 1st 2019

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on North American Palladium's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, North American Palladium's TSR for the last 3 years was 249%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that North American Palladium has rewarded shareholders with a total shareholder return of 80% in the last twelve months. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 26% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before spending more time on North American Palladium it might be wise to click here to see if insiders have been buying or selling shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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 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. Thank you for reading.