Electro Optic Systems Holdings (ASX:EOS) shareholder returns have been incredible, earning 689% in 3 years

We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One bright shining star stock has been Electro Optic Systems Holdings Limited (ASX:EOS), which is 689% higher than three years ago. It's also good to see the share price up 362% over the last quarter. It really delights us to see such great share price performance for investors.

Since the stock has added AU$201m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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Electro Optic Systems Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last three years Electro Optic Systems Holdings has grown its revenue at 7.7% annually. That's not a very high growth rate considering it doesn't make profits. Therefore, we're a little surprised to see the share price gain has been so strong, at 99% per year, compound, over three years. We'll tip our hats to that, any day, but the top-line growth isn't particularly impressive when you compare it to other pre-profit companies. Shareholders would want to be sure that the share price rise is sustainable.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Electro Optic Systems Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Electro Optic Systems Holdings has rewarded shareholders with a total shareholder return of 240% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.0% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Electro Optic Systems Holdings you should know about.

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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.