The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in African Rainbow Minerals Limited (JSE:ARI) have tasted that bitter downside in the last year, as the share price dropped 39%. That's well below the market decline of 1.6%. We note that it has not been easy for shareholders over three years, either; the share price is down 32% in that time. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. Of course, this share price action may well have been influenced by the 6.2% decline in the broader market, throughout the period.

On a more encouraging note the company has added R2.3b to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

See our latest analysis for African Rainbow Minerals

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unfortunately African Rainbow Minerals reported an EPS drop of 35% for the last year. We note that the 39% share price drop is very close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Instead, the change in the share price seems to reduction in earnings per share, alone.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on African Rainbow Minerals' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of African Rainbow Minerals, it has a TSR of -30% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.