Perseus Mining's (ASX:PRU) five-year total shareholder returns outpace the underlying earnings growth

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Perseus Mining Limited (ASX:PRU) stock is up an impressive 122% over the last five years. Unfortunately, though, the stock has dropped 3.1% over a week.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Perseus Mining

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Perseus Mining managed to grow its earnings per share at 120% a year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 7.49 also suggests market apprehension.

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

We know that Perseus Mining has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Perseus Mining stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Perseus Mining's TSR for the last 5 years was 137%, 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 Perseus Mining has rewarded shareholders with a total shareholder return of 68% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Perseus Mining better, we need to consider many other factors. Take risks, for example - Perseus Mining has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

We will like Perseus Mining better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.