Aurelia Metals' (ASX:AMI) five-year total shareholder returns outpace the underlying earnings growth

Aurelia Metals Limited (ASX:AMI) shareholders might be concerned after seeing the share price drop 13% in the last week. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 153% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 51% in the last three years.

Although Aurelia Metals has shed AU$74m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Aurelia Metals

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Aurelia Metals achieved compound earnings per share (EPS) growth of 4.2% per year. This EPS growth is slower than the share price growth of 20% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. 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 Aurelia Metals' earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Aurelia Metals' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Aurelia Metals' TSR of 170% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

While the broader market gained around 9.2% in the last year, Aurelia Metals shareholders lost 3.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 22%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 1 warning sign for Aurelia Metals you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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.