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Can You Imagine How Jubilant Ero Copper's (TSE:ERO) Shareholders Feel About Its 162% Share Price Gain?

Simply Wall St
·3 min read

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For example, the Ero Copper Corp. (TSE:ERO) share price has soared 162% in the last three years. How nice for those who held the stock! Better yet, the share price has risen 8.5% in the last week.

See our latest analysis for Ero Copper

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

During three years of share price growth, Ero Copper achieved compound earnings per share growth of 75% per year. This EPS growth is higher than the 38% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

We know that Ero Copper has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Ero Copper's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Over the last year, Ero Copper shareholders took a loss of 14%. In contrast the market gained about 4.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 38% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. 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. For instance, we've identified 2 warning signs for Ero Copper that you should be aware of.

Of course Ero Copper may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.