For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Ormat Technologies, Inc. (NYSE:ORA) shareholders have had that experience, with the share price dropping 14% in three years, versus a market return of about 27%.

Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 unfortunate three years of share price decline, Ormat Technologies actually saw its earnings per share (EPS) improve by 23% 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). Or else the company was over-hyped in the past, and so its growth has disappointed.

Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.

The modest 0.7% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 11% annual rate, so that doesn’t seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Ormat Technologies more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. If you are thinking of buying or selling Ormat Technologies stock, you should check out this free report showing analyst profit forecasts.

Ormat Technologies shareholders are up 6.6% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that’s still a gain, and it’s actually better than the average return of 3% over half a decade It is possible that returns will improve along with the business fundamentals. It’s always interesting to track share price performance over the longer term. But to understand Ormat Technologies better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Ormat Technologies .