Can You Imagine How Barrick Gold's (TSE:ABX) Shareholders Feel About The 64% Share Price Increase?

It might be of some concern to shareholders to see the Barrick Gold Corporation (TSE:ABX) share price down 16% in the last month. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 64% in that time.

View our latest analysis for Barrick Gold

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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years of share price growth, Barrick Gold moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Barrick Gold share price is down 9.3% in the last three years. Meanwhile, EPS is up 59% per year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -3.2% a year for three years.

The company's earnings per share (over time) is 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. Dive deeper into the earnings by checking this interactive graph of Barrick Gold'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Barrick Gold's TSR for the last 5 years was 73%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Barrick Gold has rewarded shareholders with a total shareholder return of 29% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 12%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Barrick Gold better, we need to consider many other factors. Take risks, for example - Barrick Gold has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

Barrick 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 CA exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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