When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right stock, you can make a lot more than 100%. For example, the Resolute Mining Limited (ASX:RSG) share price has soared 130% return in just a single year. It's also good to see the share price up 46% over the last quarter. Looking back further, the stock price is 83% higher than it was three years ago.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Resolute Mining

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year, Resolute Mining actually saw its earnings per share drop 84%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Unfortunately Resolute Mining's fell 3.0% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Resolute Mining has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Resolute Mining's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Resolute Mining shareholders have received a total shareholder return of 130% over the last year. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. To that end, you should be aware of the 1 warning sign we've spotted with Resolute Mining .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.