Yahoo Finance Investors in Grange Resources (ASX:GRR) have made a enviable return of 965% over the past five years
Grange Resources Limited (ASX:GRR) shareholders might understandably be very concerned that the share price has dropped 47% in the last quarter. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 485%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Grange Resources
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Over half a decade, Grange Resources managed to grow its earnings per share at 27% a year. This EPS growth is slower than the share price growth of 42% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Grange Resources' key metrics by checking this interactive graph of Grange Resources's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Grange Resources' TSR for the last 5 years was 965%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Grange Resources shareholders have received a total shareholder return of 84% over the last year. Of course, that includes the dividend. That's better than the annualised return of 60% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 1 warning sign for Grange Resources that you should be aware of.
We will like Grange Resources better if we see some big insider buys. While we wait, check out this free list of growing companies 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 AU 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.
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