Alamos Gold (TSE:AGI) pulls back 4.0% this week, but still delivers shareholders stellar 25% CAGR over 5 years

Alamos Gold Inc. (TSE:AGI) shareholders might be concerned after seeing the share price drop 12% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 190% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price.

Although Alamos Gold has shed CA$274m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Alamos Gold

There is no denying that markets are sometimes efficient, but prices do not always reflect 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 the five years of share price growth, Alamos Gold moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. 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. Indeed, the Alamos Gold share price has gained 62% in three years. During the same period, EPS grew by 24% each year. This EPS growth is higher than the 18% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.

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

We know that Alamos Gold has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Alamos Gold will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Alamos Gold, it has a TSR of 204% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Alamos Gold shareholders have received a total shareholder return of 10% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 25% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. If you would like to research Alamos Gold in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

Of course Alamos Gold may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.