It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For instance the Dundee Precious Metals Inc. (TSE:DPM) share price is 181% higher than it was three years ago. Most would be happy with that. In the last week the share price is up 2.5%.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Dundee Precious Metals

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During three years of share price growth, Dundee Precious Metals achieved compound earnings per share growth of 109% per year. This EPS growth is higher than the 41% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.89.

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Dundee Precious Metals' TSR for the last 3 years was 188%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Dundee Precious Metals shareholders are down 13% for the year (even including dividends), but the market itself is up 35%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Dundee Precious Metals better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Dundee Precious Metals , and understanding them should be part of your investment process.

Dundee Precious Metals is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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.

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