Even though STEP Energy Services (TSE:STEP) has lost CA$39m market cap in last 7 days, shareholders are still up 155% over 3 years

STEP Energy Services Ltd. (TSE:STEP) shareholders might be concerned after seeing the share price drop 13% in the last week. But in three years the returns have been great. In three years the stock price has launched 155% higher: a great result. So the recent fall in the share price should be viewed in that context. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for STEP Energy Services

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, STEP Energy Services 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.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on STEP Energy Services' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in STEP Energy Services had a tough year, with a total loss of 17%, against a market gain of about 16%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand STEP Energy Services better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with STEP Energy Services , and understanding them should be part of your investment process.

STEP Energy Services is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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.