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Shareholders Are Raving About How The Electro Optic Systems Holdings (ASX:EOS) Share Price Increased 757%

Simply Wall St

Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Electro Optic Systems Holdings Limited (ASX:EOS) shares for the last five years, while they gained 757%. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 24% in about a quarter.

We love happy stories like this one. The company should be really proud of that performance!

View our latest analysis for Electro Optic Systems Holdings

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 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 the last half decade, Electro Optic Systems Holdings became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Electro Optic Systems Holdings share price is up 351% in the last three years. Meanwhile, EPS is up 33% per year. Notably, the EPS growth has been slower than the annualised share price gain of 65% over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

ASX:EOS Past and Future Earnings, December 4th 2019

This free interactive report on Electro Optic Systems Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Electro Optic Systems Holdings shareholders have received a total shareholder return of 171% over the last year. That's better than the annualised return of 54% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research Electro Optic Systems Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

For those who like to find winning investments this free list of growing 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 AU exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.