Enlight Renewable Energy (TLV:ENLT) delivers shareholders 4.3% CAGR over 5 years, surging 3.7% in the last week alone

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But Enlight Renewable Energy Ltd (TLV:ENLT) has fallen short of that second goal, with a share price rise of 24% over five years, which is below the market return. The last year has been disappointing, with the stock price down 6.6% in that time.

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

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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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years of share price growth, Enlight Renewable Energy moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Enlight Renewable Energy share price is down 4.4% in the last three years. Meanwhile, EPS is up 46% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -1.5% per year.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Enlight Renewable Energy has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Enlight Renewable Energy stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 34% in the last year, Enlight Renewable Energy shareholders lost 6.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 3 warning signs with Enlight Renewable Energy (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.