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Can You Imagine How Elated Kirkland Lake Gold's (TSE:KL) Shareholders Feel About Its 594% Share Price Gain?

Simply Wall St

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Not every pick can be a winner, but when you pick the right stock, you can win big. One such superstar is Kirkland Lake Gold Ltd. (TSE:KL), which saw its share price soar 594% in three years. We note the stock price is up 2.6% in the last seven days.

It really delights us to see such great share price performance for investors.

Check out our latest analysis for Kirkland Lake Gold

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Kirkland Lake Gold was able to grow its EPS at 83% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 91% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

TSX:KL Past and Future Earnings, January 15th 2020

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Kirkland Lake Gold, it has a TSR of 601% for the last 3 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

We're pleased to report that Kirkland Lake Gold rewarded shareholders with a total shareholder return of 65% over the last year. And yes, that does include the dividend. The TSR has been even better over three years, coming in at 91% per year. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Kirkland Lake Gold by clicking this link.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.