Minera Valparaiso's (SNSE:MINERA) earnings growth rate lags the 13% CAGR delivered to shareholders

Ideally, your overall portfolio should beat the market average. But if you pick the right individual stocks, you could make more -- or less -- than that. The Minera Valparaiso S.A. (SNSE:MINERA) stock price is down 28% over five years, but the total shareholder return is 81% once you include the dividend. And that total return actually beats the market decline of 5.6%.

If the past week is anything to go by, investor sentiment for Minera Valparaiso isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Minera Valparaiso

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

While the share price declined over five years, Minera Valparaiso actually managed to increase EPS by an average of 15% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

The steady dividend doesn't really explain why the share price is down. It's not immediately clear to us why the stock price is down but further research might provide some answers.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Minera Valparaiso's TSR for the last 5 years was 81%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Minera Valparaiso shareholders are up 2.1% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 13% per year for 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. For instance, we've identified 2 warning signs for Minera Valparaiso that you should be aware of.

But note: Minera Valparaiso may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.