Pan African Resources' (LON:PAF) 32% CAGR outpaced the company's earnings growth over the same five-year period

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the Pan African Resources PLC (LON:PAF) share price has soared 227% in the last half decade. Most would be very happy with that. And in the last month, the share price has gained 9.2%.

The past week has proven to be lucrative for Pan African Resources investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Pan African Resources

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 five years of share price growth, Pan African Resources achieved compound earnings per share (EPS) growth of 9.7% per year. This EPS growth is lower than the 27% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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 Pan African Resources has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Pan African Resources will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Pan African Resources, it has a TSR of 299% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Pan African Resources shareholders have received a total shareholder return of 92% over one year. And that does include the dividend. That's better than the annualised return of 32% 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. It's always interesting to track share price performance over the longer term. But to understand Pan African Resources better, we need to consider many other factors. Take risks, for example - Pan African Resources has 4 warning signs (and 1 which is concerning) we think you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.