The one-year returns for Serabi Gold's (LON:SRB) shareholders have been impressive, yet its earnings growth was even better

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Serabi Gold plc (LON:SRB) share price has soared 124% return in just a single year. It's also good to see the share price up 22% over the last quarter. Having said that, the longer term returns aren't so impressive, with stock gaining just 13% 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.

See our latest analysis for Serabi Gold

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 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.

Serabi Gold boasted truly magnificent EPS growth in the last year. We don't think the exact number is a good guide to the sustainable growth rate, but we do think this sort of increase is impressive. So we're unsurprised to see the share price gaining ground. We're real advocates of letting inflection points like this guide our research as stock pickers.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Serabi Gold has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

We're pleased to report that Serabi Gold shareholders have received a total shareholder return of 124% over one year. That certainly beats the loss of about 1.1% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Serabi Gold , and understanding them should be part of your investment process.

But note: Serabi Gold 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.