Stock Analysis

If You Had Bought Electra Real Estate (TLV:ELCRE) Shares Five Years Ago You'd Have Earned 293% Returns

TASE:ELCRE
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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Electra Real Estate Ltd. (TLV:ELCRE) share price has soared 293% in the last half decade. Most would be very happy with that. It's also good to see the share price up 41% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 18% in 90 days).

View our latest analysis for Electra Real Estate

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last half decade, Electra Real Estate became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Electra Real Estate share price is up 266% in the last three years. Meanwhile, EPS is up 143% per year. This EPS growth is higher than the 54% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
TASE:ELCRE Earnings Per Share Growth February 3rd 2021

It might be well worthwhile taking a look at our free report on Electra Real Estate's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Electra Real Estate's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Electra Real Estate shareholders, and that cash payout contributed to why its TSR of 311%, over the last 5 years, is better than the share price return.

A Different Perspective

It's good to see that Electra Real Estate has rewarded shareholders with a total shareholder return of 25% in the last twelve months. However, the TSR over five years, coming in at 33% per year, is even more impressive. 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 Electra Real Estate you should be aware of, and 1 of them is concerning.

Of course Electra Real Estate 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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Valuation is complex, but we're here to simplify it.

Discover if Electra Real Estate might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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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