Yahoo Finance Did ECN Capital's (TSE:ECN) Share Price Deserve to Gain 84%?
By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the ECN Capital Corp. (TSE:ECN) share price is up 84% in the last three years, clearly besting the market return of around 5.4% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 24% in the last year , including dividends .
See our latest analysis for ECN Capital
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, ECN Capital moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for ECN Capital the TSR over the last 3 years was 94%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that ECN Capital rewarded shareholders with a total shareholder return of 24% over the last year. That includes the value of the dividend. But the three year TSR of 25% per year is even better. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - ECN Capital has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
This article by Simply Wall St is general in nature. 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.
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