SRE Holdings' (TSE:2980) earnings trajectory could turn positive as the stock swells 14% this past week

SRE Holdings Corporation (TSE:2980) shareholders should be happy to see the share price up 18% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 25% in the last three years, significantly under-performing the market.

While the last three years has been tough for SRE Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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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 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 three years that the share price fell, SRE Holdings' earnings per share (EPS) dropped by 7.8% each year. This change in EPS is reasonably close to the 9% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

SRE Holdings shareholders are up 4.9% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 1.9% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. For example, we've discovered 3 warning signs for SRE Holdings (1 is potentially serious!) that you should be aware of before investing here.

Of course SRE Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese 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.