Investors in KGHM Polska Miedz (WSE:KGH) have seen favorable returns of 67% over the past five years

KGHM Polska Miedz S.A. (WSE:KGH) shareholders have seen the share price descend 21% over the month. Looking further back, the stock has generated good profits over five years. It has returned a market beating 58% in that time. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 34% in the last three years.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

View our latest analysis for KGHM Polska Miedz

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.

KGHM Polska Miedz's earnings per share are down 7.8% per year, despite strong share price performance over five years. The impact of extraordinary items on earnings, in the last year, partially explain the diversion.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We doubt the modest 1.2% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 11% per year is probably viewed as evidence that KGHM Polska Miedz is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, KGHM Polska Miedz's TSR for the last 5 years was 67%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

KGHM Polska Miedz shareholders have received returns of 10% over twelve months (even including dividends), which isn't far from the general market return. It has to be noted that the recent return falls short of the 11% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

We will like KGHM Polska Miedz better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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