Anglo American Platinum (JSE:AMS) stock falls 4.5% in past week as three-year earnings and shareholder returns continue downward trend

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Anglo American Platinum Limited (JSE:AMS) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 65% drop in the share price over that period. And over the last year the share price fell 45%, so we doubt many shareholders are delighted. Furthermore, it's down 22% in about a quarter. That's not much fun for holders.

Since Anglo American Platinum has shed R7.2b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Anglo American Platinum

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Anglo American Platinum saw its EPS decline at a compound rate of 25% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 30% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

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

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Anglo American Platinum's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Anglo American Platinum's TSR for the last 3 years was -54%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 4.0% in the last year, Anglo American Platinum shareholders lost 43% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 0.4%, each year, over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Anglo American Platinum you should be aware of, and 1 of them doesn't sit too well with us.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies 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 South African 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.