Electra (TLV:ELTR) shareholders notch a 26% return over 1 year, yet earnings have been shrinking

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the Electra Limited (TLV:ELTR) share price is up 24% in the last year, that falls short of the market return. Zooming out, the stock is actually down 15% in the last three years.

Since the stock has added ₪256m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Electra

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the last year, Electra actually saw its earnings per share drop 8.5%.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We doubt the modest 1.2% dividend yield is doing much to support the share price. Revenue was pretty flat year on year, but maybe a closer look at the data can explain the market optimism.

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

If you are thinking of buying or selling Electra stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Electra shareholders gained a total return of 26% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 5% per year over five year. This suggests the company might be improving over time. 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. Even so, be aware that Electra is showing 1 warning sign in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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