The five-year shareholder returns and company earnings persist lower as Resolute Mining (ASX:RSG) stock falls a further 13% in past week

We think intelligent long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the Resolute Mining Limited (ASX:RSG) share price dropped 68% in the last half decade. That is extremely sub-optimal, to say the least. Shareholders have had an even rougher run lately, with the share price down 46% in the last 90 days.

Since Resolute Mining has shed AU$117m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Resolute 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.

During five years of share price growth, Resolute Mining moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

Revenue is actually up 8.2% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Resolute Mining has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Resolute Mining's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Resolute Mining's TSR of was a loss of 64% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Investors in Resolute Mining had a tough year, with a total loss of 2.7%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 10% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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 Resolute Mining .

We will like Resolute 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.