Optimism for Zimplats Holdings (ASX:ZIM) has grown this past week, despite five-year decline in earnings

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Zimplats Holdings Limited (ASX:ZIM) shareholders have enjoyed a 57% share price rise over the last half decade, well in excess of the market return of around 44% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 6.3% in the last year.

Since it's been a strong week for Zimplats Holdings shareholders, let's have a look at trend of the longer term fundamentals.

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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, Zimplats Holdings actually saw its EPS drop 32% per year.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It is not great to see that revenue has dropped by 4.6% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 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. Zimplats Holdings' TSR of 125% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

Zimplats Holdings provided a TSR of 6.3% over the last twelve months. But that was short of the market average. On the bright side, the longer term returns (running at about 18% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Zimplats Holdings better, we need to consider many other factors. Even so, be aware that Zimplats Holdings is showing 2 warning signs in our investment analysis , and 1 of those is significant...

But note: Zimplats Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.