The 18% return this week takes Ashot Ashkelon Industries' (TLV:ASHO) shareholders five-year gains to 558%

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Ashot Ashkelon Industries Ltd. (TLV:ASHO) shares for the last five years, while they gained 504%. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 40% in about a quarter. But this could be related to the strong market, which is up 26% in the last three months. We love happy stories like this one. The company should be really proud of that performance!

Since it's been a strong week for Ashot Ashkelon Industries shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Ashot Ashkelon Industries

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.

During the last half decade, Ashot Ashkelon Industries became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Ashot Ashkelon Industries share price is up 226% in the last three years. In the same period, EPS is up 52% per year. This EPS growth is reasonably close to the 48% average annual increase in the share price (over three years, again). That suggests that the market sentiment around the company hasn't changed much over that time. Arguably the share price is reflecting the earnings per share.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Ashot Ashkelon Industries' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Ashot Ashkelon Industries, it has a TSR of 558% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Ashot Ashkelon Industries shareholders have received a total shareholder return of 120% over one year. That's including the dividend. That's better than the annualised return of 46% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Ashot Ashkelon Industries .

Of course Ashot Ashkelon Industries may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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