Did You Participate In Any Of Zanlakol's (TLV:ZNKL) Respectable 58% Return?

By
Simply Wall St
Published
May 19, 2021
TASE:ZNKL
Source: Shutterstock

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market But Zanlakol Ltd (TLV:ZNKL) has fallen short of that second goal, with a share price rise of 23% over five years, which is below the market return. Zooming in, the stock is actually down 12% in the last year.

See our latest analysis for Zanlakol

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Zanlakol achieved compound earnings per share (EPS) growth of 2.3% per year. This EPS growth is lower than the 4% 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).

earnings-per-share-growth
TASE:ZNKL Earnings Per Share Growth May 20th 2021

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Zanlakol, it has a TSR of 58% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 39% in the last year, Zanlakol shareholders lost 6.6% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Zanlakol better, we need to consider many other factors. For instance, we've identified 3 warning signs for Zanlakol (1 shouldn't be ignored) that you should be aware of.

Of course Zanlakol 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 IL exchanges.

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