Energa (WSE:ENG) shareholders notch a 24% CAGR over 3 years, yet earnings have been shrinking

By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Energa SA (WSE:ENG), which is up 90%, over three years, soundly beating the market return of 63% (not including dividends).

Since the stock has added zł232m to its market cap in the past week alone, let's see if underlying performance has been driving long-term 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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Energa moved from a loss to profitability. So we would expect a higher share price over the period.

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

This free interactive report on Energa's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Energa shareholders are down 1.9% for the year, but the market itself is up 19%. 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. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Energa better, we need to consider many other factors. Even so, be aware that Energa is showing 2 warning signs in our investment analysis , and 1 of those is significant...

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 Polish 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.