Hamat Group (TLV:HAMAT) investors are up 11% in the past week, but earnings have declined over the last year

The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the Hamat Group Ltd. (TLV:HAMAT) share price is 58% higher than it was a year ago, much better than the market return of around 29% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 38% lower than it was three years ago.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Hamat Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over the last twelve months, Hamat Group actually shrank its EPS by 73%.

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.

Hamat Group's revenue actually dropped 19% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

It's nice to see that Hamat Group shareholders have received a total shareholder return of 58% over the last year. That's including the dividend. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For example, we've discovered 4 warning signs for Hamat Group (1 is a bit concerning!) that you should be aware of before investing here.

Of course Hamat Group 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 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.