Generation Capital Ltd (TLV:GNRS) shareholders should be happy to see that the share price has risen 18% in the last month, but if you look at the past five years the returns aren't great – the share price is down 34% in the past five years and you'd be much better off buying an index fund.
The last five years have been tough for Generation Capital shareholders, but there was a bright spot last week, so let's take a look at the longer term fundamentals to see if they're driving the negative returns.
Check out our latest analysis for Generation Capital
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a sense of how investor attitudes towards a company have changed over time.
Looking back over the past five years, Generation Capital's share price and EPS have both fallen, the latter at a rate of 22% per year. A share price decline of 8% per year isn't as bad as the decline in EPS, so investors may be expecting EPS to recover. Or they may have predicted an EPS decline for some time.
The image below shows how EPS has changed over time (if you click on the image you can see greater detail).
TASE:GNRS Earnings Per Share Growth 29 Aug 2024
Dive deeper into Generation Capital's key metrics by checking this interactive graph of Generation Capital's earnings, revenue and cash flow.
What about dividends?
For any given stock, it is important to consider the total shareholder return, as well as the price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, as well as dividends, based on the assumption that the dividends are reinvested. As such, for companies that pay large dividends, the TSR will often be a lot higher than the share price return. In the case of Generation Capital, the TSR for the last 5 years was -29%, which exceeds the share price return mentioned above. Therefore, the dividends paid by the company are boosting its total shareholder return.
A different perspective
Generation Capital shareholders have received a total return of 4.7% over the year, however this falls short of the market average. But at least it's still a gain. Over five years, the TSR is down 5% per year over five years. It's entirely possible that the business is stabilising. While it's well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider, for example, the ever-present threat of investment risk. We've identified 2 warning signs for Generation Capital and understanding these should be part of your investment process.
Of course, Generation Capital may not be the best stock to buy, so we suggest you take a look at our 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 of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
