Pulling back 5.2% this week, Summit Real Estate Holdings' TLV:SMT) five-year decline in earnings may be coming into investors focus

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For example, the Summit Real Estate Holdings Ltd (TLV:SMT) share price has soared 107% in the last half decade. Most would be very happy with that. On the other hand, we note it's down 9.5% in about a month. We note that the broader market is down 5.4% in the last month, and this may have impacted Summit Real Estate Holdings' share price.

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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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Summit Real Estate Holdings actually saw its EPS drop 8.2% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We doubt the modest 0.8% dividend yield is attracting many buyers to the stock. On the other hand, Summit Real Estate Holdings' revenue is growing nicely, at a compound rate of 19% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see below how earnings and revenue have changed over time (discover 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. 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 Summit Real Estate Holdings' 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Summit Real Estate Holdings, it has a TSR of 111% 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

Summit Real Estate Holdings shareholders gained a total return of 19% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 16% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Summit Real Estate Holdings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Summit Real Estate Holdings (of which 2 are a bit unpleasant!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.