Elco (TLV:ELCO) shareholders are up 8.5% this past week, but still in the red over the last three years

It is doubtless a positive to see that the Elco Ltd. (TLV:ELCO) share price has gained some 54% in the last three months. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 32% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

While the stock has risen 8.5% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Elco

Elco isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Elco saw its revenue grow by 8.2% per year, compound. That's a pretty good rate of top-line growth. Shareholders have seen the share price fall at 10% per year, for three years. This implies the market had higher expectations of Elco. However, that's in the past now, and it's the future is more important - and the future looks brighter (based on revenue, anyway).

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Elco's TSR for the last 3 years was -29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Elco provided a TSR of 28% over the year (including dividends). That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 6% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand Elco better, we need to consider many other factors. For instance, we've identified 2 warning signs for Elco that you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.