Investors more bullish on Griffin Mining (LON:GFM) this week as stock rallies 10%, despite earnings trending downwards over past year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Griffin Mining Limited (LON:GFM) share price is up 53% in the last 1 year, clearly besting the market return of around 0.8% (not including dividends). That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 12% in three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Griffin Mining

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Over the last twelve months, Griffin Mining actually shrank its EPS by 48%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We think that the revenue growth of 26% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's nice to see that Griffin Mining shareholders have received a total shareholder return of 53% over the last year. That's better than the annualised return of 2% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Griffin Mining better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Griffin Mining (of which 1 can't be ignored!) you should know about.

But note: Griffin Mining 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 British 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.