ecotel communication ag (ETR:E4C) delivers shareholders incredible 118% CAGR over 3 years, surging 20% in the last week alone

ecotel communication ag (ETR:E4C) shareholders have seen the share price descend 23% over the month. But over the last three years the stock has shone bright like a diamond. In fact, the share price has taken off in that time, up 487%. Arguably, the recent fall is to be expected after such a strong rise. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

Since the stock has added €21m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for ecotel communication ag

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, ecotel communication ag 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.

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

It is of course excellent to see how ecotel communication ag has grown profits over the years, but the future is more important for shareholders. This free interactive report on ecotel communication ag's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for ecotel communication ag the TSR over the last 3 years was 943%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that ecotel communication ag shareholders have received a total shareholder return of 120% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 51% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 4 warning signs for ecotel communication ag (2 don't sit too well with us!) that you should be aware of before investing here.

If you are like me, then you will 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 German 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.