Can You Imagine How Elated Ramelius Resources' (ASX:RMS) Shareholders Feel About Its 536% Share Price Gain?

While Ramelius Resources Limited (ASX:RMS) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 22% in the last quarter. But over five years returns have been remarkably great. In fact, during that period, the share price climbed 536%. Impressive! So it might be that some shareholders are taking profits after good performance. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.

It really delights us to see such great share price performance for investors.

View our latest analysis for Ramelius Resources

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 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.

Over half a decade, Ramelius Resources managed to grow its earnings per share at 34% a year. This EPS growth is slower than the share price growth of 45% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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 Ramelius Resources has grown profits over the years, but the future is more important for shareholders. This free interactive report on Ramelius Resources' balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Ramelius Resources' TSR for the last 5 years was 547%, 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 Ramelius Resources has rewarded shareholders with a total shareholder return of 26% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 45% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. To that end, you should be aware of the 2 warning signs we've spotted with Ramelius Resources .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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. 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.
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