Investors more bullish on OPC Energy (TLV:OPCE) this week as stock advances 3.8%, despite earnings trending downwards over past year

On average, over time, stock markets tend to rise higher. This makes investing attractive. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the OPC Energy Ltd. (TLV:OPCE), share price is up over the last year, but its gain of 33% trails the market return. Unfortunately the longer term returns are not so good, with the stock falling 11% in the last three years.

Since the stock has added ₪309m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for OPC Energy

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During the last year, OPC Energy actually saw its earnings per share drop 28%.

This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We think that the revenue growth of 12% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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

A Different Perspective

OPC Energy shareholders are up 33% for the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 4% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand OPC Energy better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for OPC Energy you should be aware of, and 1 of them makes us a bit uncomfortable.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.