Sandstorm Gold (TSE:SSL) investors are sitting on a loss of 36% if they invested three years ago
For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Sandstorm Gold Ltd. (TSE:SSL) shareholders have had that experience, with the share price dropping 36% in three years, versus a market return of about 31%.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Sandstorm 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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate three years of share price decline, Sandstorm Gold actually saw its earnings per share (EPS) improve by 2.7% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. But it's possible a look at other metrics will be enlightening.
With a rather small yield of just 1.2% we doubt that the stock's share price is based on its dividend. Revenue is actually up 22% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Sandstorm Gold further; while we may be missing something on this analysis, there might also be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Sandstorm Gold will earn in the future (free profit forecasts).
A Different Perspective
While the broader market gained around 1.6% in the last year, Sandstorm Gold shareholders lost 7.8% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Sandstorm Gold better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Sandstorm Gold you should be aware of.
Sandstorm Gold is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
