Bezeq The Israel Telecommunication (TLV:BEZQ) delivers shareholders strong 15% CAGR over 5 years, surging 5.0% in the last week alone

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. To wit, the Bezeq The Israel Telecommunication share price has climbed 78% in five years, easily topping the market return of 32% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 10% in the last year, including dividends.

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

See our latest analysis for Bezeq The Israel Telecommunication

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years of share price growth, Bezeq The Israel Telecommunication moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Bezeq The Israel Telecommunication share price is up 14% in the last three years. During the same period, EPS grew by 8.0% each year. This EPS growth is higher than the 4% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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

What About Dividends?

As well as measuring the share price return, investors should also consider the 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Bezeq The Israel Telecommunication, it has a TSR of 105% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Bezeq The Israel Telecommunication shareholders gained a total return of 10% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 15% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Take risks, for example - Bezeq The Israel Telecommunication has 2 warning signs we think you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.