BCI Minerals (ASX:BCI) shareholders have earned a 11% CAGR over the last five years

The last three months have been tough on BCI Minerals Limited (ASX:BCI) shareholders, who have seen the share price decline a rather worrying 32%. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 68% has certainly bested the market return! Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 47% decline over the last twelve months.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for BCI Minerals

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.

During the five years of share price growth, BCI Minerals moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the BCI Minerals share price is up 41% in the last three years. In the same period, EPS is up 4.1% per year. This EPS growth is lower than the 12% average annual increase in the share price over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that BCI Minerals has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between BCI Minerals' total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that BCI Minerals' TSR of 71% over the last 5 years is better than the share price return.

A Different Perspective

While the broader market lost about 2.3% in the twelve months, BCI Minerals shareholders did even worse, losing 47%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 11%, 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. 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. To that end, you should be aware of the 2 warning signs we've spotted with BCI Minerals .

Of course BCI Minerals may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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