The 6.5% return this week takes New Gold's (TSE:NGD) shareholders five-year gains to 322%

We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held New Gold Inc. (TSE:NGD) shares for the last five years, while they gained 322%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 27% over the last quarter.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

We've discovered 1 warning sign about New Gold. View them for free.

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years of share price growth, New 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 like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's nice to see that New Gold shareholders have received a total shareholder return of 110% over the last year. That gain is better than the annual TSR over five years, which is 33%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand New Gold better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with New Gold , and understanding them should be part of your investment process.

New Gold is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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.