The 5.7% return this week takes Century Aluminum's (NASDAQ:CENX) shareholders three-year gains to 173%

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For example, the Century Aluminum Company (NASDAQ:CENX) share price has soared 173% in the last three years. Most would be happy with that. It's also good to see the share price up 25% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 19% in 90 days).

Since the stock has added US$98m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Century Aluminum became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

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 Century Aluminum has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Century Aluminum's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Century Aluminum shareholders gained a total return of 2.0% during the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 20% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Century Aluminum better, we need to consider many other factors. For instance, we've identified 2 warning signs for Century Aluminum (1 is potentially serious) that you should be aware of.

Of course Century Aluminum may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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