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Antofagasta plc (LON:ANTO) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But don't let that distract from the very nice return generated over three years. In the last three years the share price is up, 90%: better than the market.
Since the long term performance has been good but there's been a recent pullback of 3.7%, let's check if the fundamentals match the share price.
See our latest analysis for Antofagasta
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 three years of share price growth, Antofagasta achieved compound earnings per share growth of 45% per year. The average annual share price increase of 24% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.80.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Antofagasta has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Antofagasta, it has a TSR of 116% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Investors in Antofagasta had a tough year, with a total loss of 2.7% (including dividends), against a market gain of about 2.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 12%, 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. 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. Even so, be aware that Antofagasta is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...