The five-year decline in earnings might be taking its toll on Freeport-McMoRan (NYSE:FCX) shareholders as stock falls 5.0% over the past week

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Freeport-McMoRan Inc. (NYSE:FCX) shares for the last five years, while they gained 431%. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 35% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

Since the long term performance has been good but there's been a recent pullback of 5.0%, let's check if the fundamentals match the share price.

Check out our latest analysis for Freeport-McMoRan

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Freeport-McMoRan's earnings per share are down 3.0% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 1.2% dividend yield is unlikely to be propping up the share price. On the other hand, Freeport-McMoRan's revenue is growing nicely, at a compound rate of 12% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Freeport-McMoRan is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Freeport-McMoRan in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Freeport-McMoRan the TSR over the last 5 years was 463%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Freeport-McMoRan shareholders have received a total shareholder return of 50% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 41% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Freeport-McMoRan better, we need to consider many other factors. Even so, be aware that Freeport-McMoRan is showing 2 warning signs in our investment analysis , you should know about...

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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.