The 15% return this week takes Environmental Group's (ASX:EGL) shareholders three-year gains to 709%

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. You won't get it right every time, but when you do, the returns can be truly splendid. For example, the The Environmental Group Limited (ASX:EGL) share price is up a whopping 709% in the last three years, a handsome return for long term holders. It's also good to see the share price up 25% over the last quarter. But this could be related to the strong market, which is up 11% in the last three months. We love happy stories like this one. The company should be really proud of that performance!

Since it's been a strong week for Environmental Group shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Environmental Group

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. 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.

During three years of share price growth, Environmental Group moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Environmental Group has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that Environmental Group shareholders have received a total shareholder return of 34% over the last year. However, the TSR over five years, coming in at 44% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Environmental Group better, we need to consider many other factors. For instance, we've identified 2 warning signs for Environmental Group that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.