The one-year decline in earnings for Enefit Green TAL:EGR1T) isn't encouraging, but shareholders are still up 20% over that period

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Enefit Green AS (TAL:EGR1T) share price is up 16% in the last 1 year, clearly besting the market decline of around 2.4% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Enefit Green hasn't been listed for long, so it's still not clear if it is a long term winner.

In light of the stock dropping 4.7% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

Check out our latest analysis for Enefit Green

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last twelve months, Enefit Green actually shrank its EPS by 39%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

For starters, we suspect the share price has been buoyed by the dividend, which was increased during the year. Income-seeking investors probably helped bid up the stock price. Though we must add that the revenue growth of 29% year on year would have helped paint a pretty picture.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Enefit Green

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Enefit Green, it has a TSR of 20% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Enefit Green boasts a total shareholder return of 20% for the last year (that includes the dividends) . A substantial portion of that gain has come in the last three months, with the stock up 5.6% in that time. This suggests the company is continuing to win over new investors. It's always interesting to track share price performance over the longer term. But to understand Enefit Green better, we need to consider many other factors. Even so, be aware that Enefit Green is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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