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It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For instance the Meshulam Levinstein Contracting & Engineering Ltd. (TLV:LEVI) share price is 245% higher than it was three years ago. Most would be happy with that. On top of that, the share price is up 41% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
On the back of a solid 7-day performance, let’s check what role the company’s fundamentals have played in driving long term shareholder returns.
See our latest analysis for Meshulam Levinstein Contracting & Engineering
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the three years of share price growth, Meshulam Levinstein Contracting & Engineering actually saw its earnings per share (EPS) drop 6.7% per year.
This means it’s unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.
Languishing at just 1.1%, we doubt the dividend is doing much to prop up the share price. It could be that the revenue growth of 21% per year is viewed as evidence that Meshulam Levinstein Contracting & Engineering is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder’s faith in better days ahead will be rewarded.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Meshulam Levinstein Contracting & Engineering stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Meshulam Levinstein Contracting & Engineering’s TSR for the last 3 years was 269%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We’re pleased to report that Meshulam Levinstein Contracting & Engineering shareholders have received a total shareholder return of 89% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 31%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with 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. Case in point: We’ve spotted 2 warning signs for Meshulam Levinstein Contracting & Engineering you should be aware of.
Of course Meshulam Levinstein Contracting & Engineering 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 IL 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.
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