Israel Shipyards Industries (TLV:ISHI) shareholders notch a 21% CAGR over 5 years, yet earnings have been shrinking

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Israel Shipyards Industries Ltd (TLV:ISHI) stock is up an impressive 142% over the last five years. It's also good to see the share price up 37% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 19% in 90 days).

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

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Israel Shipyards Industries actually saw its EPS drop 11% per year.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The modest 0.5% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 12% per year is probably viewed as evidence that Israel Shipyards Industries is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Israel Shipyards Industries' financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Israel Shipyards Industries' TSR for the last 5 years was 159%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Israel Shipyards Industries shareholders gained a total return of 43% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 21% per year over five year. This suggests the company might be improving over time. 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. To that end, you should learn about the 4 warning signs we've spotted with Israel Shipyards Industries (including 2 which can't be ignored) .

Of course Israel Shipyards Industries 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.