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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Yancoal Australia Ltd (ASX:YAL) shareholders would be well aware of this, since the stock is up 120% in five years. In the last week shares have slid back 1.4%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Yancoal Australia
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, Yancoal Australia became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Yancoal Australia's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Yancoal Australia's TSR of 283% over the last 5 years is better than the share price return.
A Different Perspective
It's good to see that Yancoal Australia has rewarded shareholders with a total shareholder return of 24% in the last twelve months. Having said that, the five-year TSR of 31% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Yancoal Australia better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Yancoal Australia , and understanding them should be part of your investment process.