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Metals Exploration plc (LON:MTL) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In three years the stock price has launched 282% higher: a great result. To some, the recent share price pullback wouldn't be surprising after such a good run. If the business can perform well for years to come, then the recent drop could be an opportunity.
Although Metals Exploration has shed UK£11m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Check out our latest analysis for Metals Exploration
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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Metals Exploration achieved compound earnings per share growth of 116% per year. This EPS growth is higher than the 56% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 0.82 also reflects the negative sentiment around the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Metals Exploration has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Metals Exploration stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that Metals Exploration has rewarded shareholders with a total shareholder return of 98% in the last twelve months. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 3 warning signs for Metals Exploration (2 shouldn't be ignored) that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.