Silver Lake Resources (ASX: SLR) 47% CAGR Outpaced Company Profit Growth in Same Three-Year Period

The worst outcome, after buying a company’s stock (assuming there is no leverage), would be to lose all the money you put into it. But when you choose a business that is truly successful, you can Make more than 100%. Namely, the Silver Lake Resources Limited The share price (ASX: SLR) has jumped 217% over the past three years. This kind of feedback is as solid as granite. On top of that, the share price rose 25% in about a quarter.

Based on a strong 7-day performance, let’s check out what role company fundamentals have played in generating long-term returns for shareholders.

Check out our latest review for Silver Lake Resources

In his essay Graham-and-Doddsville super-investors Warren Buffett described how stock prices don’t always rationally reflect a company’s value. By comparing earnings per share (EPS) and changes in stock prices over time, we can get a sense of how investors’ attitudes towards a company have changed over time.

Over the three years of stock price growth, Silver Lake Resources achieved compound earnings per share growth of 51% per year. We don’t think it’s entirely a coincidence that EPS growth is reasonably close to the 47% average annual increase in the share price. This suggests that the sentiment of the market around the company has not changed much during this time. On the contrary, the change in the share price may have mimicked EPS growth.

The company’s earnings per share (over time) is shown in the image below (click to see exact numbers).

ASX: SLR Growth in earnings per share on December 22, 2021

It is of course great to see how Silver Lake Resources has increased its profits over the years, but the future is more important to shareholders. If you are thinking of buying or selling shares of Silver Lake Resources, you should check out this FREE detailed report on its balance sheet.

A different perspective

While the broader market gained around 16% last year, Silver Lake Resources shareholders lost 2.8%. Even good stock prices drop sometimes, but we want to see improvements in the fundamentals of a business, before we get too interested. Longer-term investors wouldn’t be so upset, as they would have gained 23% each year over five years. The recent sell-off may be an opportunity, so it may be worth checking the fundamentals for signs of a long-term growth trend. It is always interesting to follow the evolution of stock prices over the long term. But to better understand Silver Lake Resources, there are many other factors that we need to consider. Concrete example: we have spotted 2 warning signs for Silver Lake Resources you must be aware.

If you like to buy stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).

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

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.