Shareholders Of Gaon Group (TLV:GAGR) Must Be Happy With Their 170% Total Return

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Gaon Group Ltd. (TLV:GAGR) shareholders have enjoyed a 69% share price rise over the last half decade, well in excess of the market return of around 55% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 18%.

View our latest analysis for Gaon Group

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).

Gaon Group's earnings per share are down 20% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

In contrast revenue growth of 6.5% per year is probably viewed as evidence that Gaon Group is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Gaon Group's financial health with this free report on its balance sheet.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Gaon Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Gaon Group's TSR of 170% over the last 5 years is better than the share price return.

A Different Perspective

It's nice to see that Gaon Group shareholders have received a total shareholder return of 18% over the last year. However, that falls short of the 22% TSR per annum it has made for shareholders, each year, over five years. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Gaon Group is showing 6 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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This article by Simply Wall St is general in nature. 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.
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