30-01-2025
Investing in Aura Minerals (TSE:ORA) five years ago would have delivered you a 822% gain
Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Aura Minerals Inc. (TSE:ORA) shares for the last five years, while they gained 604%. This just goes to show the value creation that some businesses can achieve. In the last week the share price is up 2.2%. It really delights us to see such great share price performance for investors.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Aura Minerals
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Aura Minerals' earnings per share are down 20% per year, despite strong share price performance over five years.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
There's no sign of growing dividends, which might have explained the resilient share price. But it's reasonably likely that the 14% annual compound revenue growth is considered evidence that Aura Minerals has plenty of growth ahead of it. In that case, the company may be sacrificing current earnings per share to drive growth.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Aura Minerals' TSR for the last 5 years was 822%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
It's nice to see that Aura Minerals shareholders have received a total shareholder return of 121% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 56% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Aura Minerals , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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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