When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Encavis AG (ETR:ECV) stock is up an impressive 156% over the last five years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Encavis
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over half a decade, Encavis managed to grow its earnings per share at 31% a year. The EPS growth is more impressive than the yearly share price gain of 21% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Encavis has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About The Total Shareholder Return (TSR)?
We've already covered Encavis' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Encavis' TSR of 181% over the last 5 years is better than the share price return.
A Different Perspective
Investors in Encavis had a tough year, with a total loss of 6.6%, against a market gain of about 9.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 23%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Encavis better, we need to consider many other factors. Even so, be aware that Encavis is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...