When you buy a stock, there is always a chance that it will fall 100%. But the good side is that you can earn far more than 100% on a really good stock. For example, the price of Pan African Resources PLC (LON:PAF) has risen by an impressive 124% over the past five years. It is also pleasing to note that the share price has risen by 22% in the last quarter.

With this in mind, it is worth examining whether the company’s underlying fundamentals have been the driver of its long-term performance or whether there are some discrepancies.

View our latest analysis for Pan African Resources

To paraphrase Benjamin Graham, in the short run, the market is a voting machine, but in the long run, it’s a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).

Over half a decade, Pan African Resources managed to grow its earnings per share by 34% per year. EPS growth is more impressive than the 17% annual share price increase over the same period. So it seems that the market is not so enthusiastic about the stock at the moment. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.32.

The following graph shows how EPS has changed over time (the exact values ​​can be viewed by clicking on the image).

We know that Pan African Resources has improved its earnings recently, but will the company grow its revenue? Check if analysts think Pan African Resources will grow its revenue in the future.

What about dividends?

In addition to measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR includes the value of any spin-offs or discounted capital raisings, as well as any dividends, based on the assumption that the dividends are reinvested. One could argue that the TSR gives a more comprehensive picture of the return generated by a stock. In fact, Pan African Resources’ TSR over the last 5 years was 169%, which exceeds the share price return mentioned earlier. This is largely due to the dividend payments!

A different perspective

It’s nice to see that Pan African Resources shareholders have received a total return of 131% over the last year. And that includes the dividend. That’s better than the 22% annualized return over half a decade, meaning the company has been doing better recently. At its best, this could indicate real business momentum, meaning now could be a good time to get in deeper. I find it very interesting to look at the share price over the long term as an indicator of business performance. But to really gain insight, we need to consider other information as well. For example, we’ve identified: 2 warning signs for Pan African Resources that you should know.

The story continues

If you would rather check out another company — one with potentially better financials — then don’t miss this free List of companies that have proven their ability to increase their earnings.

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

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.