Capricorn Metals (ASX:CMM) delivers shareholders massive 49% CAGR over 5 years, surging 6.2% in the last week alone

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. For example, the Capricorn Metals Ltd (ASX:CMM) share price is up a whopping 628% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 37% in about a quarter. We love happy stories like this one. The company should be really proud of that performance!

The past week has proven to be lucrative for Capricorn Metals investors, so let's see if fundamentals drove the company's five-year performance.

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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 the last half decade, Capricorn Metals became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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. Indeed, the Capricorn Metals share price has gained 125% in three years. In the same period, EPS is up 8.2% per year. This EPS growth is lower than the 31% average annual increase in the share price over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Capricorn Metals' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Capricorn Metals has rewarded shareholders with a total shareholder return of 91% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 49% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.