Can You Imagine How Westgold Resources' (ASX:WGX) Shareholders Feel About The 64% Share Price Increase?

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Westgold Resources Limited (ASX:WGX) share price is up 64% in the last three years, clearly besting the market return of around 9.5% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 38%.

Check out our latest analysis for Westgold Resources

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Westgold Resources was able to grow its EPS at 67% per year over three years, sending the share price higher. The average annual share price increase of 18% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Westgold Resources' total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Westgold Resources' TSR, at 70% is higher than its share price return of 64%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's nice to see that Westgold Resources shareholders have gained 38% (in total) over the last year. That's better than the annualized TSR of 19% over the last three years. Given the track record of solid returns over varying time frames, it might be worth putting Westgold Resources on your watchlist. It's always interesting to track share price performance over the longer term. But to understand Westgold Resources better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Westgold Resources you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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