Computer Direct Group's (TLV:CMDR) earnings growth rate lags the 25% CAGR delivered to shareholders

It hasn't been the best quarter for Computer Direct Group Ltd. (TLV:CMDR) shareholders, since the share price has fallen 24% in that time. But that doesn't change the fact that shareholders have received really good returns over the last five years. Indeed, the share price is up an impressive 104% in that time. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.

Although Computer Direct Group has shed ₪105m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Computer Direct Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Computer Direct Group achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is remarkably close to the 15% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Computer Direct Group's key metrics by checking this interactive graph of Computer Direct Group's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Computer Direct Group the TSR over the last 5 years was 203%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

The total return of 23% received by Computer Direct Group shareholders over the last year isn't far from the market return of -21%. Longer term investors wouldn't be so upset, since they would have made 25%, each year, over five years. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. 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. For example, we've discovered 1 warning sign for Computer Direct Group that you should be aware of before investing here.

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.

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

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.