Bank Leumi le-Israel B.M (TLV:LUMI) jumps 3.2% this week, though earnings growth is still tracking behind five-year shareholder returns

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Bank Leumi le-Israel B.M. (TLV:LUMI) share price is up 48% in the last 5 years, clearly besting the market return of around 29% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 43% in the last year, including dividends.

The past week has proven to be lucrative for Bank Leumi le-Israel B.M investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Bank Leumi le-Israel B.M

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...' 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 five years of share price growth, Bank Leumi le-Israel B.M achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is higher than the 8% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.69.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Bank Leumi le-Israel B.M has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Bank Leumi le-Israel B.M's TSR for the last 5 years was 77%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Bank Leumi le-Israel B.M shareholders have received a total shareholder return of 43% over the last year. And that does include the dividend. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Bank Leumi le-Israel B.M you should know about.

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 Israeli exchanges.

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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.