Electro Optic Systems Holdings Limited (ASX:EOS) shareholders might be concerned after seeing the share price drop 23% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. Indeed, the share price is up an impressive 182% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 42% decline over the last twelve months.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Electro Optic Systems Holdings

Because Electro Optic Systems Holdings made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Electro Optic Systems Holdings saw its revenue grow at 44% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 23% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Electro Optic Systems Holdings worth investigating - it may have its best days ahead.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 30% in the last year, Electro Optic Systems Holdings shareholders lost 42%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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 Electro Optic Systems Holdings better, we need to consider many other factors. Take risks, for example - Electro Optic Systems Holdings has 2 warning signs we think you should be aware of.