Electra Consumer Products (1970) (TLV:ECP) delivers shareholders favorable 13% CAGR over 5 years, surging 17% in the last week alone

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Electra Consumer Products (1970) Ltd (TLV:ECP) shareholders have enjoyed a 46% share price rise over the last half decade, well in excess of the market return of around 34% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 32%.

The past week has proven to be lucrative for Electra Consumer Products (1970) investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Electra Consumer Products (1970)

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Electra Consumer Products (1970) actually saw its EPS drop 6.1% per year.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

On the other hand, Electra Consumer Products (1970)'s revenue is growing nicely, at a compound rate of 26% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

This free interactive report on Electra Consumer Products (1970)'s balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Electra Consumer Products (1970) the TSR over the last 5 years was 86%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Electra Consumer Products (1970) shareholders have received returns of 32% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 13%. 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Electra Consumer Products (1970) (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.