AIC Mines’ (ASX:A1M) three-year decline in earnings translates into losses for shareholders
AIC Mines Limited (ASX:A1M) shareholders should be happy to see the share price up 16% in the last month. But that doesn’t help the fact that the three year return is less impressive. After all, the share price is down 26% in the last three years, significantly under-performing the market.
The recent uptick of 10% could be a positive sign of things to come, so let’s take a look at historical fundamentals.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During the three years that the share price fell, AIC Mines’ earnings per share (EPS) dropped by 48% each year. This fall in the EPS is worse than the 10% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
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. It might be well worthwhile taking a look at our free report on AIC Mines’ earnings, revenue and cash flow.
AIC Mines’ TSR for the year was broadly in line with the market average, at 12%. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 1.9%, which was endured over half a decade. While ‘turnarounds seldom turn’ there are green shoots for AIC Mines. 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. Take risks, for example – AIC Mines has 2 warning signs we think you should be aware of.
AIC Mines is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.
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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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