Ludan Engineering's (TLV:LUDN) three-year total shareholder returns outpace the underlying earnings growth

It's been a soft week for Ludan Engineering Co. Ltd. (TLV:LUDN) shares, which are down 12%. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. The share price marched upwards over that time, and is now 238% higher than it was. After a run like that some may not be surprised to see prices moderate. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Ludan Engineering

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Ludan Engineering was able to grow its EPS at 67% per year over three years, sending the share price higher. This EPS growth is higher than the 50% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.94.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Ludan Engineering's 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Ludan Engineering's TSR for the last 3 years was 260%, 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 good to see that Ludan Engineering has rewarded shareholders with a total shareholder return of 125% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 19% 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. It's always interesting to track share price performance over the longer term. But to understand Ludan Engineering better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Ludan Engineering , and understanding them should be part of your investment process.

But note: Ludan Engineering may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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.

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