Bank of Jerusalem (TLV:JBNK) Has Compensated Shareholders With A Respectable 36% Return On Their Investment

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Bank of Jerusalem Ltd. (TLV:JBNK) share price is up 15% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 3.4% in that time.

View our latest analysis for Bank of Jerusalem

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 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.

Over half a decade, Bank of Jerusalem managed to grow its earnings per share at 5.0% a year. The EPS growth is more impressive than the yearly share price gain of 3% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 8.17 also suggests market apprehension.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Bank of Jerusalem's key metrics by checking this interactive graph of Bank of Jerusalem's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Bank of Jerusalem's TSR for the last 5 years was 36%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

The total return of 0.8% received by Bank of Jerusalem shareholders over the last year isn't far from the market return of -0.8%. The silver lining is that longer term investors would have made a total return of 6% per year over half a decade. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand Bank of Jerusalem better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Bank of Jerusalem you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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