The total return for Ari Real Estate (Arena) Investment (TLV:ARIN) investors has risen faster than earnings growth over the last five years

The Ari Real Estate (Arena) Investment Ltd (TLV:ARIN) share price has had a bad week, falling 11%. But that doesn't change the fact that the returns over the last half decade have been spectacular. In that time, the share price has soared some 677% higher! So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 30% decline over the last three years: that's a long time to wait for profits. It really delights us to see such great share price performance for investors.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Ari Real Estate (Arena) Investment achieved compound earnings per share (EPS) growth of 18% per 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).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Ari Real Estate (Arena) Investment'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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Ari Real Estate (Arena) Investment's TSR for the last 5 years was 702%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Ari Real Estate (Arena) Investment provided a TSR of 22% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 52% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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 2 warning signs for Ari Real Estate (Arena) Investment you should be aware of, and 1 of them is significant.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.