As Kumba Iron Ore (JSE:KIO) climbs 3.4% this past week, investors may now be noticing the company's one-year earnings growth

It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Kumba Iron Ore Limited (JSE:KIO) share price slid 43% over twelve months. That's well below the market return of 19%. At least the damage isn't so bad if you look at the last three years, since the stock is down 24% in that time.

On a more encouraging note the company has added R3.6b to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

View our latest analysis for Kumba Iron Ore

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the unfortunate twelve months during which the Kumba Iron Ore share price fell, it actually saw its earnings per share (EPS) improve by 55%. It could be that the share price was previously over-hyped.

It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.

We don't see any weakness in the Kumba Iron Ore's dividend so the steady payout can't really explain the share price drop. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Unless, of course, the market was expecting a revenue uptick.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Kumba Iron Ore is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Kumba Iron Ore the TSR over the last 1 year was -37%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Kumba Iron Ore had a tough year, with a total loss of 37% (including dividends), against a market gain of about 19%. 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 8% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Kumba Iron Ore (1 can't be ignored!) that you should be aware of before investing here.

We will like Kumba Iron Ore better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.