If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the CI Resources Limited (ASX:CII) share price is 24% higher than it was a year ago, much better than the market return of around 2.8% (not including dividends) in the same period. That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 22% in three years.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for CI Resources
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
CI Resources was able to grow EPS by 105% in the last twelve months. This EPS growth is significantly higher than the 24% increase in the share price. So it seems like the market has cooled on CI Resources, despite the growth. Interesting.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into CI Resources' key metrics by checking this interactive graph of CI Resources's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of CI Resources, it has a TSR of 27% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that CI Resources shareholders have received a total shareholder return of 27% over the last year. That's including the dividend. Notably the five-year annualised TSR loss of 1.2% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for CI Resources you should be aware of.