The total return for Qualitau (TLV:QLTU) investors has risen faster than earnings growth over the last five years

Qualitau Ltd (TLV:QLTU) shareholders might be concerned after seeing the share price drop 11% in the last week. But in stark contrast, the returns over the last half decade have impressed. In fact, the share price is 274% higher today. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.

While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Qualitau

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Qualitau achieved compound earnings per share (EPS) growth of 30% per year. That makes the EPS growth particularly close to the yearly share price growth of 30%. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

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

This free interactive report on Qualitau's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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, Qualitau's TSR for the last 5 years was 359%, 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 Qualitau shareholders have received a total shareholder return of 57% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 36%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Qualitau , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.