Ecovacs Robotics (SHSE:603486) stock performs better than its underlying earnings growth over last five years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Ecovacs Robotics Co., Ltd. (SHSE:603486) stock is up an impressive 145% over the last five years. On top of that, the share price is up 28% in about a quarter. But this could be related to the strong market, which is up 33% in the last three months.

The past week has proven to be lucrative for Ecovacs Robotics investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Ecovacs Robotics

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 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.

Over half a decade, Ecovacs Robotics managed to grow its earnings per share at 15% a year. This EPS growth is lower than the 20% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 48.53.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Ecovacs Robotics' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ecovacs Robotics the TSR over the last 5 years was 152%, 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

It's nice to see that Ecovacs Robotics shareholders have received a total shareholder return of 35% over the last year. Of course, that includes the dividend. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Ecovacs Robotics better, we need to consider many other factors. Take risks, for example - Ecovacs Robotics has 2 warning signs we think you should be aware of.

For those who like to find winning investments this free list of undervalued 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 Chinese 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.