When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you’d like to see the share price move up more than the market average. Unfortunately for shareholders, while the Barrick Gold Corporation (TSE:ABX) share price is up 39% in the last five years, that’s less than the market return. Meanwhile, the last twelve months saw the share price rise 3.1%.
Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.
See our latest analysis for Barrick Gold
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. 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 the five years of share price growth, Barrick Gold 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.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Barrick Gold’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Barrick Gold, it has a TSR of 57% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Barrick Gold shareholders gained a total return of 5.7% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 9% per year for five years. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. It’s always interesting to track share price performance over the longer term. But to understand Barrick Gold better, we need to consider many other factors. For example, we’ve discovered 3 warning signs for Barrick Gold (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Barrick Gold is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
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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.