Despite the downward trend in earnings at Sella Capital Real Estate (TLV:SLARL) the stock rallies 12%, bringing five-year gains to 131%

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But Sella Capital Real Estate Ltd. (TLV:SLARL) has fallen short of that second goal, with a share price rise of 67% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 52% over the last year.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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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).

Sella Capital Real Estate's earnings per share are down 9.0% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

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 11% per year, would encourage people to invest.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sella Capital Real Estate the TSR over the last 5 years was 131%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Sella Capital Real Estate shareholders have received returns of 63% over twelve months (even including dividends), which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 18% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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 - Sella Capital Real Estate has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.

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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.