Earnings growth of 4.9% over 1 year hasn't been enough to translate into positive returns for Generation Capital (TLV:GNRS) shareholders

While not a mind-blowing move, it is good to see that the Generation Capital Ltd (TLV:GNRS) share price has gained 15% in the last three months. But in truth the last year hasn't been good for the share price. After all, the share price is down 44% in the last year, significantly under-performing the market.

After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Generation Capital

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 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.

Even though the Generation Capital share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.

Vibrant companies don't usually cut their dividends, so the recent reduction might help explain why the Generation Capital share price has been weak.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Generation Capital'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Generation Capital, it has a TSR of -42% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

The last twelve months weren't great for Generation Capital shares, which performed worse than the market, costing holders 42%, including dividends. Meanwhile, the broader market slid about 12%, likely weighing on the stock. The three-year loss of 2.4% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. To that end, you should learn about the 3 warning signs we've spotted with Generation Capital (including 1 which can't be ignored) .

But note: Generation Capital 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 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.