Vecima Networks (TSE:VCM) soars 17% this week, taking three-year gains to 113%

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. For example, the Vecima Networks Inc. (TSE:VCM) share price has soared 101% in the last three years. Most would be happy with that. Better yet, the share price has risen 17% in the last week.

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

Check out our latest analysis for Vecima Networks

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).

Over the last three years, Vecima Networks failed to grow earnings per share, which fell 38% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.

Languishing at just 1.3%, we doubt the dividend is doing much to prop up the share price. It may well be that Vecima Networks revenue growth rate of 14% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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. You can see what analysts are predicting for Vecima Networks in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Vecima Networks the TSR over the last 3 years was 113%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Vecima Networks provided a TSR of 19% over the year (including dividends). That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 14% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Vecima Networks better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Vecima Networks you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.