Investing in Black Diamond Group (TSE:BDI) three years ago would have delivered you a 84% gain

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It might be of some concern to shareholders to see the Black Diamond Group Limited (TSE:BDI) share price down 13% in the last month. But that shouldn’t obscure the pleasing returns achieved by shareholders over the last three years. To wit, the share price did better than an index fund, climbing 83% during that period.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Black Diamond Group

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 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 three years of share price growth, Black Diamond Group moved from a loss to profitability. That would generally be considered a positive, so we’d expect the share price to be up.

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

earnings-per-share-growth

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Black Diamond Group’s earnings, revenue and cash flow.

A Different Perspective

Black Diamond Group shareholders are up 2.6% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 3% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we’ve discovered 1 warning sign for Black Diamond Group that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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