I.B.I Investment House's (TLV:IBI) earnings growth rate lags the 32% CAGR delivered to shareholders

I.B.I Investment House Ltd. (TLV:IBI) shareholders have seen the share price descend 11% over the month. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 183% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Although I.B.I Investment House has shed ₪162m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for I.B.I Investment House

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, I.B.I Investment House achieved compound earnings per share (EPS) growth of 28% per year. This EPS growth is higher than the 23% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.73.

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 I.B.I Investment House'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. We note that for I.B.I Investment House the TSR over the last 5 years was 299%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that I.B.I Investment House shareholders have received a total shareholder return of 18% over one year. And that does include the dividend. Having said that, the five-year TSR of 32% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand I.B.I Investment House better, we need to consider many other factors. For instance, we've identified 1 warning sign for I.B.I Investment House that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies 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.