Delek Automotive Systems (TLV:DLEA) shareholders notch a 23% CAGR over 5 years, yet earnings have been shrinking

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Delek Automotive Systems share price has climbed 60% in five years, easily topping the market return of 45% (ignoring dividends).

The past week has proven to be lucrative for Delek Automotive Systems investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Delek Automotive Systems

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.

Delek Automotive Systems' earnings per share are down 27% per year, despite strong share price performance over five years.

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 note that the dividend is higher than it was previously - always nice to see. It could be that the company is reaching maturity and dividend investors are buying for the yield. We'd posit that the revenue growth over the last five years, of 13% per year, would encourage people to invest.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Delek Automotive Systems' balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Delek Automotive Systems' TSR for the last 5 years was 185%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Delek Automotive Systems shareholders have received a total shareholder return of 53% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 23%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Delek Automotive Systems better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for Delek Automotive Systems you should be aware of, and 3 of them are potentially serious.

But note: Delek Automotive Systems may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.