Y.Z. Queenco's (TLV:QNCO) three-year total shareholder returns outpace the underlying earnings growth

It's been a soft week for Y.Z. Queenco Ltd. (TLV:QNCO) shares, which are down 14%. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In fact, the share price is up a full 115% compared to three years ago. After a run like that some may not be surprised to see prices moderate. If the business can perform well for years to come, then the recent drop could be an opportunity.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Y.Z. Queenco achieved compound earnings per share growth of 65% per year. The average annual share price increase of 29% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.34.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Y.Z. Queenco'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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Y.Z. Queenco's TSR for the last 3 years was 127%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 49% in the last year, Y.Z. Queenco shareholders lost 0.6% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 1.0% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Y.Z. Queenco better, we need to consider many other factors. Even so, be aware that Y.Z. Queenco is showing 2 warning signs in our investment analysis , you should know about...

Of course Y.Z. Queenco may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.