Enlight Renewable Energy (TLV:ENLT) shareholders YoY returns are lagging the company's 90% one-year earnings growth

We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. Unfortunately for shareholders, while the Enlight Renewable Energy Ltd (TLV:ENLT) share price is up 40% in the last year, that falls short of the market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 2.6% in three years.

While the stock has fallen 6.3% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying 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.

Enlight Renewable Energy was able to grow EPS by 90% in the last twelve months. This EPS growth is significantly higher than the 40% increase in the share price. Therefore, it seems the market isn't as excited about Enlight Renewable Energy as it was before. This could be an opportunity.

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

It is of course excellent to see how Enlight Renewable Energy has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Enlight Renewable Energy's financial health with this free report on its balance sheet.

A Different Perspective

Enlight Renewable Energy shareholders are up 40% for the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 5% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Enlight Renewable Energy better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Enlight Renewable Energy you should be aware of.

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.