Silver Lake Resources' (ASX:SLR) Wonderful 987% Share Price Increase Shows How Capitalism Can Build Wealth

Silver Lake Resources Limited (ASX:SLR) shareholders might be concerned after seeing the share price drop 24% in the last month. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 987%. Impressive! So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price.

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

Check out our latest analysis for Silver Lake Resources

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the last half decade, Silver Lake Resources 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. We can see that the Silver Lake Resources share price is up 396% in the last three years. Meanwhile, EPS is up 326% per year. This EPS growth is higher than the 70% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 5.42.

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

We know that Silver Lake Resources has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Silver Lake Resources' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Silver Lake Resources shareholders have received a total shareholder return of 60% over the last year. However, the TSR over five years, coming in at 61% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Silver Lake Resources better, we need to consider many other factors. Take risks, for example - Silver Lake Resources has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

We will like Silver Lake Resources better if we see some big insider buys. While we wait, check out this free list of growing companies 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 AU exchanges.

When trading Silver Lake Resources or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.