Hamat Group's (TLV:HAMAT) earnings trajectory could turn positive as the stock jumps 14% this past week

Hamat Group Ltd. (TLV:HAMAT) shareholders should be happy to see the share price up 14% in the last week. Meanwhile over the last three years the stock has dropped hard. Regrettably, the share price slid 60% in that period. Some might say the recent bounce is to be expected after such a bad drop. While many would remain nervous, there could be further gains if the business can put its best foot forward.

On a more encouraging note the company has added ₪59m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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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. 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.

Hamat Group saw its EPS decline at a compound rate of 52% per year, over the last three years. This fall in the EPS is worse than the 26% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 46.63.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Hamat Group's earnings, revenue and cash flow.

A Different Perspective

Hamat Group shareholders gained a total return of 1.0% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 9% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Hamat Group (at least 2 which are concerning) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.