BQE Water (CVE:BQE) stock performs better than its underlying earnings growth over last five years

We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the BQE Water Inc. (CVE:BQE) share price. It's 693% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. And in the last week the share price has popped 17%. We love happy stories like this one. The company should be really proud of that performance!

Since the stock has added CA$12m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for BQE Water

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, BQE Water achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is slower than the share price growth of 51% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on BQE Water's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that BQE Water shareholders have received a total shareholder return of 136% over the last year. That gain is better than the annual TSR over five years, which is 51%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with BQE Water , and understanding them should be part of your investment process.

BQE Water is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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.