Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Sandfire Resources Limited (ASX:SFR) share price is up 43% in the last 1 year, clearly besting the market return of around 6.3% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! It is also impressive that the stock is up 32% over three years, adding to the sense that it is a real winner.
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.
View our latest analysis for Sandfire Resources
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
Over the last twelve months Sandfire Resources went from profitable to unprofitable. While this may prove temporary, we’d consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.
Sandfire Resources’ revenue actually dropped 24% over last year. So the fundamental metrics don’t provide an obvious explanation for the share price gain.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. You can see what analysts are predicting for Sandfire Resources in this interactive graph of future profit estimates.
A Different Perspective
It’s good to see that Sandfire Resources has rewarded shareholders with a total shareholder return of 43% in the last twelve months. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before spending more time on Sandfire Resources it might be wise to click here to see if insiders have been buying or selling shares.
Of course Sandfire Resources 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 Australian 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.
