Stock Analysis

If You Had Bought Eclipx Group's (ASX:ECX) Shares Three Years Ago You Would Be Down 54%

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ASX:ECX
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If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Eclipx Group Limited (ASX:ECX) shareholders. So they might be feeling emotional about the 54% share price collapse, in that time. It's up 4.2% in the last seven days.

View our latest analysis for Eclipx Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Eclipx Group became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
ASX:ECX Earnings and Revenue Growth January 4th 2021

We know that Eclipx Group has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Eclipx Group will earn in the future (free profit forecasts).

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Eclipx Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Eclipx Group's TSR, which was a 51% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

It's nice to see that Eclipx Group shareholders have received a total shareholder return of 25% over the last year. That certainly beats the loss of about 5% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Even so, be aware that Eclipx Group is showing 1 warning sign in our investment analysis , you should know about...

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 AU exchanges.

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