Menora Mivtachim Holdings' (TLV:MMHD) investors will be pleased with their fantastic 480% return over the last five years

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. For example, the Menora Mivtachim Holdings Ltd (TLV:MMHD) share price is up a whopping 322% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 14% in about a quarter.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, Menora Mivtachim Holdings managed to grow its earnings per share at 29% a year. This EPS growth is reasonably close to the 33% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Menora Mivtachim Holdings' key metrics by checking this interactive graph of Menora Mivtachim Holdings'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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Menora Mivtachim Holdings the TSR over the last 5 years was 480%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Menora Mivtachim Holdings has rewarded shareholders with a total shareholder return of 117% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 42% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 1 warning sign for Menora Mivtachim Holdings you should be aware of.

We will like Menora Mivtachim Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.