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Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. For example, the Saracen Mineral Holdings Limited (ASX:SAR) share price is up a whopping 794% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 19% gain in the last three months.
Anyone who held for that rewarding ride would probably be keen to talk about it.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the five years of share price growth, Saracen Mineral Holdings moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Saracen Mineral Holdings share price is up 166% in the last three years. In the same period, EPS is up 66% per year. This EPS growth is higher than the 39% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Saracen Mineral Holdings has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It's good to see that Saracen Mineral Holdings has rewarded shareholders with a total shareholder return of 45% in the last twelve months. However, the TSR over five years, coming in at 55% per year, is even more impressive. Before spending more time on Saracen Mineral Holdings it might be wise to click here to see if insiders have been buying or selling shares.
Of course Saracen Mineral Holdings 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 AU 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 firstname.lastname@example.org. 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.