Equital's (TLV:EQTL) earnings growth rate lags the 24% CAGR delivered to shareholders

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Equital Ltd. (TLV:EQTL) stock is up an impressive 192% over the last five years. The last week saw the share price soften some 4.0%.

Although Equital has shed ₪218m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Equital

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Equital achieved compound earnings per share (EPS) growth of 0.2% per year. This EPS growth is lower than the 24% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Equital shareholders have received returns of 34% over twelve months, which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 24% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Equital better, we need to consider many other factors. For instance, we've identified 2 warning signs for Equital (1 is significant) that you should be aware of.

But note: Equital 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.