Royal Gold's (NASDAQ:RGLD) one-year earnings growth trails the 30% YoY shareholder returns

One way to deal with stock volatility is to ensure you have a properly diverse portfolio. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is Royal Gold, Inc. (NASDAQ:RGLD), which saw its share price increase 28% in the last year, slightly above the market return of around 26% (not including dividends). The longer term returns are positive, with the share price up 25% in three years.

The past week has proven to be lucrative for Royal Gold investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for Royal Gold

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the last year Royal Gold grew its earnings per share (EPS) by 4.7%. This EPS growth is significantly lower than the 28% increase in the share price. This indicates that the market is now more optimistic about the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Royal Gold provided a TSR of 30% over the year (including dividends). That's fairly close to the broader market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 2%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. Before spending more time on Royal Gold it might be wise to click here to see if insiders have been buying or selling shares.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.