Alkane Resources' (ASX:ALK) earnings trajectory could turn positive as the stock swells 10% this past week

Alkane Resources Ltd (ASX:ALK) shareholders should be happy to see the share price up 10% in the last week. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 48% in the last three years, falling well short of the market return.

While the stock has risen 10% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for Alkane Resources

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Alkane Resources saw its EPS decline at a compound rate of 20% per year, over the last three years. The 19% average annual share price decline is remarkably close to the EPS decline. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Alkane Resources' key metrics by checking this interactive graph of Alkane Resources's earnings, revenue and cash flow.

A Different Perspective

Investors in Alkane Resources had a tough year, with a total loss of 30%, against a market gain of about 17%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 Alkane Resources is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

But note: Alkane Resources 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 Australian 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.