Those who invested in First International Bank of Israel (TLV:FIBI) five years ago are up 173%

When you buy a stock, there is always a chance that it will drop 100%. But on a lighter note, a good company can see its stock price soar well over 100%. Long term First International Bank of Israel Ltd (TLV:FIBI) shareholders would be well aware of this, since the stock has risen 124% in five years. It is down 1.8% over the past seven days.

With that in mind, it’s worth looking at whether the company’s underlying fundamentals have been driving long-term performance, or if there are any gaps.

See our latest analysis for First International Bank of Israel

To paraphrase Benjamin Graham: in the short term, the market is a voting machine, but in the long term, it is a weighing machine. An imperfect but reasonable way to gauge changing sentiment around a company is to compare earnings per share (EPS) with the stock price.

In half a decade, the First International Bank of Israel has managed to grow its earnings per share by 19% per year. Thus, the EPS growth rate is quite close to the annualized stock price gain of 18% per year. Therefore, one could conclude that sentiment towards equities has not changed much. Indeed, it would seem that the share price reacts to BPA.

The image below shows how EPS has tracked over time (if you click on the image you can see more details).

TASE: FIBI earnings per share growth December 16, 2021

It might be interesting to take a look at our free First International Bank of Israel earnings, revenue and cash flow report.

What about dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, assuming the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. It turns out that First International Bank of Israel’s TSR for the last 5 years was 173%, which exceeds the share price return mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

It is good to see that the First International Bank of Israel has rewarded its shareholders with a total shareholder return of 52% over the past twelve months. Of course, this includes the dividend. As the one-year TSR is better than the five-year TSR (the latter standing at 22% per year), it seems that the stock’s performance has improved lately. Someone with an optimistic outlook might see the recent improvement in TSR as indicating that the company itself is improving over time. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Example: we have identified 1 warning sign for First International Bank of Israel you should be aware.

If you like buying stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on IL exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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