The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For example, the CECO Environmental Corp. (NASDAQ:CECO) share price has soared 257% in the last three years. Most would be happy with that. It's also good to see the share price up 12% over the last quarter.

Although CECO Environmental has shed US$60m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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 was able to grow its EPS at 64% per year over three years, sending the share price higher. This EPS growth is higher than the 53% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. Having said that, the market is still optimistic, given the P/E ratio of 69.35.

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

We're pleased to report that CECO Environmental shareholders have received a total shareholder return of 91% over one year. That's better than the annualised return of 28% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with CECO Environmental .

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.