The total return for Alpha Metallurgical Resources (NYSE:AMR) investors has risen faster than earnings growth over the last five years

While Alpha Metallurgical Resources, Inc. (NYSE:AMR) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 30% in the last quarter. But that doesn't undermine the fantastic longer term performance (measured over five years). In that time, the share price has soared some 874% higher! So we don't think the recent decline in the share price means its story is a sad one. Only time will tell if there is still too much optimism currently reflected in the share price. It really delights us to see such great share price performance for investors.

Although Alpha Metallurgical Resources has shed US$179m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Alpha Metallurgical Resources

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the five years of share price growth, Alpha Metallurgical Resources moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Alpha Metallurgical Resources' TSR for the last 5 years was 925%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Alpha Metallurgical Resources had a tough year, with a total loss of 1.4% (including dividends), against a market gain of about 35%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 59% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Alpha Metallurgical Resources better, we need to consider many other factors. For example, we've discovered 2 warning signs for Alpha Metallurgical Resources (1 is a bit concerning!) that you should be aware of before investing here.

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.