Zimplats Holdings (ASX:ZIM) stock performs better than its underlying earnings growth over last five years
Zimplats Holdings Limited (ASX:ZIM) shareholders might be concerned after seeing the share price drop 17% in the last month. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 392%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. Only time will tell if there is still too much optimism currently reflected in the share price.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
View our latest analysis for Zimplats Holdings
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Zimplats Holdings achieved compound earnings per share (EPS) growth of 82% per year. This EPS growth is higher than the 38% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.82.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Zimplats Holdings' key metrics by checking this interactive graph of Zimplats Holdings's earnings, revenue and cash flow.
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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Zimplats Holdings the TSR over the last 5 years was 669%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Zimplats Holdings has rewarded shareholders with a total shareholder return of 37% in the last twelve months. And that does include the dividend. However, that falls short of the 50% TSR per annum it has made for shareholders, each year, over five years. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Zimplats Holdings you should know about.
But note: Zimplats Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
