Optimism around Zimplats Holdings (ASX:ZIM) delivering new earnings growth may be shrinking as stock declines 8.3% this past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term Zimplats Holdings Limited (ASX:ZIM) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 64% in that time. And over the last year the share price fell 30%, so we doubt many shareholders are delighted. The last week also saw the share price slip down another 8.3%.

After losing 8.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Zimplats Holdings saw its EPS decline at a compound rate of 65% per year, over the last three years. In comparison the 29% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

Dive deeper into Zimplats Holdings' key metrics by checking this interactive graph of Zimplats Holdings's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Zimplats Holdings' share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Zimplats Holdings shareholders, and that cash payout explains why its total shareholder loss of 57%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Investors in Zimplats Holdings had a tough year, with a total loss of 30%, against a market gain of about 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Zimplats Holdings is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

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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.