Investing in Eldorado Gold (TSE:ELD) five years ago would have delivered you a 148% gain

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For example, the Eldorado Gold Corporation (TSE:ELD) share price has soared 148% in the last half decade. Most would be very happy with that. On the other hand, we note it's down 8.3% in about a month. We note that the broader market is down 2.5% in the last month, and this may have impacted Eldorado Gold's share price.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Eldorado 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 five years of share price growth, Eldorado Gold moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

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

We know that Eldorado Gold has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

We're pleased to report that Eldorado Gold shareholders have received a total shareholder return of 51% over one year. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Eldorado Gold you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com