Investing in Minera Valparaiso (SNSE:MINERA) three years ago would have delivered you a 67% gain

Buying a low-cost index fund will get you the average market return. But across the board there are plenty of stocks that underperform the market. For example, the Minera Valparaiso S.A. (SNSE:MINERA) share price return of 28% over three years lags the market return in the same period. In the last year the stock price gained, albeit only 1.4%.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last three years, Minera Valparaiso failed to grow earnings per share, which fell 26% (annualized).

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.

We doubt the dividend payments explain the share price rise, since we don't see any improvement in that regard. Many investors probably think the fact that Minera Valparaiso's revenue has been declining at a rate of 6.9% per year is a real negative. And to be fair, we don't see how EPS can grow sustainably without a boost to revenue.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Minera Valparaiso's balance sheet strength is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Minera Valparaiso, it has a TSR of 67% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Minera Valparaiso shareholders gained a total return of 6.7% during the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 15% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Minera Valparaiso you should know about.

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