Yahoo Finance Ero Copper (TSE:ERO) sheds 5.6% this week, as yearly returns fall more in line with earnings growth
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Ero Copper Corp. (TSE:ERO) share price has soared 148% in the last half decade. Most would be very happy with that. On top of that, the share price is up 15% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
Since the long term performance has been good but there's been a recent pullback of 5.6%, let's check if the fundamentals match the share price.
Check out our latest analysis for Ero Copper
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During five years of share price growth, Ero Copper achieved compound earnings per share (EPS) growth of 17% per year. So the EPS growth rate is rather close to the annualized share price gain of 20% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Ero Copper has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Ero Copper's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that Ero Copper shareholders have received a total shareholder return of 52% over the last year. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For instance, we've identified 4 warning signs for Ero Copper (1 is concerning) that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian 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.
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