While not a mind-blowing move, it is good to see that the Enerpac Tool Group Corp. (NYSE:EPAC) share price has gained 19% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 23% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
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 five years of share price growth, Enerpac Tool Group moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it’s worth looking at other metrics to try to understand the share price move.
With a rather small yield of just 0.2% we doubt that the stock’s share price is based on its dividend. Arguably the revenue decline of 27% per year has people thinking Enerpac Tool Group is shrinking. And that’s not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Enerpac Tool Group has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Enerpac Tool Group
A Different Perspective
Enerpac Tool Group shareholders are down 13% for the year (even including dividends), but the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3.2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It’s always interesting to track share price performance over the longer term. But to understand Enerpac Tool Group better, we need to consider many other factors. Even so, be aware that Enerpac Tool Group is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable…
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. 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.
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