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When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Beacon Minerals Limited (ASX:BCN) share price is up 94% in the last 5 years, clearly besting the market return of around 22% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 7.2% in the last year , including dividends .
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Beacon Minerals
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.
During the last half decade, Beacon Minerals became profitable. That would generally be considered a positive, so we'd expect the share price to be up.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Beacon Minerals' earnings, revenue and cash flow.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Beacon Minerals the TSR over the last 5 years was 164%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Beacon Minerals' TSR for the year was broadly in line with the market average, at 7.2%. We should note here that the five-year TSR is more impressive, at 21% per year. Although the share price growth has slowed, the longer term story points to a business well worth watching. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Beacon Minerals , and understanding them should be part of your investment process.