Abra Information Technologies' (TLV:ABRA) five-year earnings growth trails the 12% YoY shareholder returns

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Abra Information Technologies Ltd. (TLV:ABRA) shareholders have enjoyed a 69% share price rise over the last half decade, well in excess of the market return of around 20% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 0.9%, including dividends.

Since the stock has added ₪27m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Abra Information Technologies

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Over half a decade, Abra Information Technologies managed to grow its earnings per share at 40% a year. The EPS growth is more impressive than the yearly share price gain of 11% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Abra Information Technologies' key metrics by checking this interactive graph of Abra Information Technologies's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Abra Information Technologies' share price action, but we should also mention its total shareholder return (TSR). 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 Abra Information Technologies shareholders, and that cash payout contributed to why its TSR of 80%, over the last 5 years, is better than the share price return.

A Different Perspective

Abra Information Technologies provided a TSR of 0.9% over the last twelve months. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 12% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Abra Information Technologies is showing 2 warning signs in our investment analysis , you should know about...

We will like Abra Information Technologies better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com