Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Agnico Eagle Mines Limited (NYSE:AEM) share price slid 24% over twelve months. That’s well below the market decline of 8.3%. On the other hand, the stock is actually up 17% over three years. The falls have accelerated recently, with the share price down 14% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
If the past week is anything to go by, investor sentiment for Agnico Eagle Mines isn’t positive, so let’s see if there’s a mismatch between fundamentals and the share price.
Check out our latest analysis for Agnico Eagle Mines
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unfortunately Agnico Eagle Mines reported an EPS drop of 31% for the last year. This fall in the EPS is significantly worse than the 24% the share price fall. So the market may not be too worried about the EPS figure, at the moment — or it may have expected earnings to drop faster.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Agnico Eagle Mines’ earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Agnico Eagle Mines’ TSR for the last 1 year was -21%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 8.3% in the twelve months, Agnico Eagle Mines shareholders did even worse, losing 21% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Longer term investors wouldn’t be so upset, since they would have made 5%, 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 Agnico Eagle Mines better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Agnico Eagle Mines (of which 1 is concerning!) you should know about.
Agnico Eagle Mines is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here