As Ecovyst (NYSE:ECVT) jumps 11% this past week, investors may now be noticing the company's three-year earnings growth
While it may not be enough for some shareholders, we think it is good to see the Ecovyst Inc. (NYSE:ECVT) share price up 11% in a single quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 34% in the last three years, significantly under-performing the market.
While the last three years has been tough for Ecovyst shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
Check out our latest analysis for Ecovyst
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 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).
Although the share price is down over three years, Ecovyst actually managed to grow EPS by 15% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
We note that, in three years, revenue has actually grown at a 14% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Ecovyst more closely, as sometimes stocks fall unfairly. This could present an opportunity.
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 know that Ecovyst has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Ecovyst in this interactive graph of future profit estimates.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Ecovyst's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Ecovyst's TSR, at -18% is higher than its share price return of -34%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Ecovyst provided a TSR of 1.9% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 0.5% per year over five year. It is possible that returns will improve along with the business fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Ecovyst is showing 2 warning signs in our investment analysis , and 1 of those is concerning...
We will like Ecovyst better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.
