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Investors in Enerpac Tool Group (NYSE:EPAC) have unfortunately lost 12% over the last three years

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Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Enerpac Tool Group Corp. (NYSE:EPAC) shareholders have had that experience, with the share price dropping 12% in three years, versus a market return of about 83%. In the last ninety days we've seen the share price slide 20%. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

Check out our latest analysis for Enerpac Tool Group

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the unfortunate three years of share price decline, Enerpac Tool Group actually saw its earnings per share (EPS) improve by 104% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It is a little bizarre to see the share price down, despite a strong improvement to earnings per share. Therefore, we should look at some other metrics to try to understand why the market is disappointed.

The modest 0.2% dividend yield is unlikely to be guiding the market view of the stock. The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. There doesn't seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

We know that Enerpac Tool Group has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Enerpac Tool Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Enerpac Tool Group shareholders gained a total return of 4.1% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 1.5% endured over half a decade. So this might be a sign the business has turned its fortunes around. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Enerpac Tool Group you should know about.

But note: Enerpac Tool Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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