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Did You Miss GrafTech International's (NYSE:EAF) 61% Share Price Gain?

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Diversification is a key tool for dealing with stock price volatility. But the goal is to pick stocks that do better than average. One such company is GrafTech International Ltd. (NYSE:EAF), which saw its share price increase 61% in the last year, slightly above the market return of around 54% (not including dividends). Zooming out, the stock is actually down 22% in the last three years.

See our latest analysis for GrafTech International

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 last year, GrafTech International actually saw its earnings per share drop 37%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We doubt the modest 0.3% dividend yield is doing much to support the share price. Unfortunately GrafTech International's fell 32% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

It's probably worth noting that the CEO is paid less than the median at similar sized 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 GrafTech International in this interactive graph of future profit estimates.

A Different Perspective

GrafTech International shareholders have gained 62% over twelve months (even including dividends). This isn't far from the market return of 57%. Given the three-year TSR of 4% per year, shareholders probably aren't too concerned by the recent gain! It could well be that the business is getting back on track. It's always interesting to track share price performance over the longer term. But to understand GrafTech International better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with GrafTech International (including 1 which is concerning) .

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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. 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.