CECO Environmental Corp. (NASDAQ:CECE) shareholders should be happy to see the share price up 17% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 38%, which falls well short of the return you could get by buying an index fund.

See our latest analysis for CECO Environmental

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.

CECO Environmental became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

The revenue decline of 1.2% isn't too bad. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that CECO Environmental has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What about the Total Shareholder Return (TSR)?

We've already covered CECO Environmental's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for CECO Environmental shareholders, and that cash payout explains why its total shareholder loss of 34%, over the last 5 years, isn't as bad as the share price return.

A Different Perspective

While the broader market gained around 9.0% in the last year, CECO Environmental shareholders lost 35%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7.9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 CECO Environmental is showing 2 warning signs in our investment analysis , you should know about...

Of course CECO Environmental 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 US 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.

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