Those who invested in Evolution Mining (ASX:EVN) three years ago are up 333%

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. Take, for example, the Evolution Mining Limited (ASX:EVN) share price, which skyrocketed 308% over three years. It's also good to see the share price up 39% over the last quarter.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years of share price growth, Evolution Mining achieved compound earnings per share growth of 37% per year. In comparison, the 60% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

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

It is of course excellent to see how Evolution Mining has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Evolution Mining's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Evolution Mining the TSR over the last 3 years was 333%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Evolution Mining shareholders have received a total shareholder return of 124% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 15% 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. It's always interesting to track share price performance over the longer term. But to understand Evolution Mining better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Evolution Mining you should be aware of.

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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.