Investing in Barrick Gold (TSE:ABX) three years ago would have delivered you a 20% gain

While Barrick Gold Corporation (TSE:ABX) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 11% in the last quarter. But at least the stock is up over the last three years. Arguably you'd have been better off buying an index fund, because the gain of 10% in three years isn't amazing.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Barrick Gold

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.

During the three years of share price growth, Barrick Gold actually saw its earnings per share (EPS) drop 5.8% per year.

Earnings per share have melted like a stack of ice cubes, in stark contrast to the share price. So we'll need to take a look at some different metrics to try to understand why the share price remains solid.

The revenue drop of 0.5% is as underwhelming as some politicians. The only thing that's clear is there is low correlation between Barrick Gold's share price and its historic fundamental data. Further research may be required!

You can see how earnings and revenue have 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. This free report showing analyst forecasts should help you form a view on Barrick Gold

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Barrick Gold's TSR for the last 3 years was 20%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Barrick Gold shareholders gained a total return of 8.8% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Barrick Gold better, we need to consider many other factors. For instance, we've identified 1 warning sign for Barrick Gold that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian 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.