Endeavour Silver Corp. (TSE:EDR) shareholders should be happy to see the share price up 16% in the last week. Meanwhile over the last three years the stock has dropped hard. Regrettably, the share price slid 67% in that period. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.

While the last three years has been tough for Endeavour Silver 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.

See our latest analysis for Endeavour Silver

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Endeavour Silver moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So it’s worth looking at other metrics to try to understand the share price move.

We note that, in three years, revenue has actually grown at a 19% annual rate, so that doesn’t seem to be a reason to sell shares. It’s probably worth investigating Endeavour Silver further; while we may be missing something on this analysis, there might also be an opportunity.

The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Endeavour Silver has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Endeavour Silver in this interactive graph of future profit estimates.

A Different Perspective

Endeavour Silver shareholders are down 41% for the year, but the market itself is up 7.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. 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. It’s always interesting to track share price performance over the longer term. But to understand Endeavour Silver better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with Endeavour Silver (at least 1 which doesn’t sit too well with us) , and understanding them should be part of your investment process.

Of course Endeavour Silver 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 Canadian 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.