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It hasn't been the best quarter for Freeport-McMoRan Inc. (NYSE:FCX) shareholders, since the share price has fallen 20% in that time. But that doesn't change the fact that the returns over the last five years have been very strong. It's fair to say most would be happy with 203% the gain in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Of course, that doesn't necessarily mean it's cheap now.
The past week has proven to be lucrative for Freeport-McMoRan investors, so let's see if fundamentals drove the company's five-year performance.
View our latest analysis for Freeport-McMoRan
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. 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 five years of share price growth, Freeport-McMoRan achieved compound earnings per share (EPS) growth of 54% per year. This EPS growth is higher than the 25% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Freeport-McMoRan's key metrics by checking this interactive graph of Freeport-McMoRan'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Freeport-McMoRan, it has a TSR of 219% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 23% in the last year, Freeport-McMoRan shareholders lost 3.9% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 26%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 1 warning sign for Freeport-McMoRan you should be aware of.