Generation Capital (TLV:GNRS) shareholders notch a 47% return over 1 year, yet earnings have been shrinking

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Generation Capital Ltd (TLV:GNRS) share price is 47% higher than it was a year ago, much better than the market return of around 34% (not including dividends) in the same period. So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 18% lower than it was three years ago.

Since it's been a strong week for Generation Capital shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Generation Capital

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last twelve months, Generation Capital actually shrank its EPS by 16%.

Given the share price gain, we doubt the market is measuring progress with EPS. 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 haven't seen Generation Capital increase dividend payments yet, so the yield probably hasn't helped drive the share higher. Revenue actually dropped 15% over last year. Usually that correlates with a lower share price, but let's face it, the gyrations of the market are sometimes only as clear as mud.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

A Different Perspective

We're pleased to report that Generation Capital shareholders have received a total shareholder return of 47% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.6% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Generation Capital better, we need to consider many other factors. For instance, we've identified 2 warning signs for Generation Capital (1 doesn't sit too well with us) that you should be aware of.

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.