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Royal Gold, Inc. (NASDAQ:RGLD) shareholders might be concerned after seeing the share price drop 22% in the last quarter. But at least the stock is up over the last five years. In that time, it is up 41%, which isn't bad, but is below the market return of 66%.
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.
See our latest analysis for Royal Gold
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over half a decade, Royal Gold managed to grow its earnings per share at 23% a year. This EPS growth is higher than the 7% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Royal Gold's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Royal Gold the TSR over the last 5 years was 49%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While it's never nice to take a loss, Royal Gold shareholders can take comfort that , including dividends,their trailing twelve month loss of 4.6% wasn't as bad as the market loss of around 20%. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Royal Gold you should know about.