Delek Group's (TLV:DLEKG) earnings growth rate lags the 60% CAGR delivered to shareholders

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. To wit, the Delek Group Ltd. (TLV:DLEKG) share price has soared 698% over five years. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 15% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 6.4% in 90 days). We love happy stories like this one. The company should be really proud of that performance!

In light of the stock dropping 8.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for Delek Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Over half a decade, Delek Group managed to grow its earnings per share at 20% a year. This EPS growth is slower than the share price growth of 51% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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 Delek Group's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Delek Group, it has a TSR of 934% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Delek Group shareholders have received returns of 34% over twelve months (even including dividends), which isn't far from the general market return. It has to be noted that the recent return falls short of the 60% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Delek Group a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand Delek Group better, we need to consider many other factors. Take risks, for example - Delek Group has 2 warning signs we think you should be aware of.

Of course Delek Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.