Anglo American's (LON:AAL) earnings growth rate lags the 33% CAGR delivered to shareholders

Anglo American plc (LON:AAL) shareholders might be concerned after seeing the share price drop 19% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 217% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Since the long term performance has been good but there's been a recent pullback of 9.7%, let's check if the fundamentals match the share price.

Check out our latest analysis for Anglo American

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

Over half a decade, Anglo American managed to grow its earnings per share at 42% a year. The EPS growth is more impressive than the yearly share price gain of 26% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.60.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Anglo American has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Anglo American's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Anglo American's TSR for the last 5 years was 318%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Anglo American has rewarded shareholders with a total shareholder return of 25% in the last twelve months. And that does include the dividend. However, that falls short of the 33% TSR per annum it has made for shareholders, each year, over five years. 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. Case in point: We've spotted 3 warning signs for Anglo American you should be aware of, and 1 of them is a bit concerning.

If you are like me, then you will not want to miss this free list of growing companies 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 GB 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.