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Allkem (ASX:AKE) jumps 10% this week, taking three-year gains to 306%

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Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. But when you hold the right stock for the right time period, the rewards can be truly huge. For example, the Allkem Limited (ASX:AKE) share price is up a whopping 306% in the last three years, a handsome return for long term holders. Better yet, the share price has risen 10% in the last week.

The past week has proven to be lucrative for Allkem investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Allkem

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Allkem has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. So it might be better to look at other metrics to try to understand the share price.

It could be that the revenue growth of 39% per year is viewed as evidence that Allkem is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Allkem in this interactive graph of future profit estimates.

A Different Perspective

We're pleased to report that Allkem shareholders have received a total shareholder return of 37% over one year. That gain is better than the annual TSR over five years, which is 29%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Allkem better, we need to consider many other factors. Even so, be aware that Allkem is showing 1 warning sign in our investment analysis , you should know about...

But note: Allkem 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 AU exchanges.

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

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.

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