Investors in Ecolab (NYSE:ECL) have seen decent returns of 32% over the past year

Diversification is a key tool for dealing with stock price volatility. Of course, the aim of the game is to pick stocks that do better than an index fund. Ecolab Inc. (NYSE:ECL) has done well over the last year, with the stock price up 31% beating the market return of 30% (not including dividends). However, the longer term returns haven't been so impressive, with the stock up just 5.6% in the last three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Ecolab

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 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.

Ecolab was able to grow EPS by 66% in the last twelve months. This EPS growth is significantly higher than the 31% increase in the share price. Therefore, it seems the market isn't as excited about Ecolab as it was before. This could be an opportunity.

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

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. Dive deeper into the earnings by checking this interactive graph of Ecolab's earnings, revenue and cash flow.

A Different Perspective

Ecolab provided a TSR of 32% 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 7% 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 Ecolab better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Ecolab .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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