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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term Shapir Engineering and Industry Ltd (TLV:SPEN) shareholders would be well aware of this, since the stock is up 141% in five years. It's even up 7.7% in the last week. But this might be partly because the broader market had a good week last week, gaining 4.4%.

Since the stock has added 671m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Shapir Engineering and Industry

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. 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.

Over half a decade, Shapir Engineering and Industry managed to grow its earnings per share at 4.4% a year. This EPS growth is lower than the 19% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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

It might be well worthwhile taking a look at our free report on Shapir Engineering and Industry's earnings, revenue and cash flow.

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Shapir Engineering and Industry the TSR over the last 5 years was 152%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

Although it hurts that Shapir Engineering and Industry returned a loss of 3.5% in the last twelve months, the broader market was actually worse, returning a loss of 10%. Longer term investors wouldn't be so upset, since they would have made 20%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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 3 warning signs for Shapir Engineering and Industry you should be aware of, and 1 of them is a bit unpleasant.

We will like Shapir Engineering and Industry better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Israeli exchanges.

Find out whether Shapir Engineering and Industry is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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Shapir Engineering and Industry's (TLV:SPEN) 20% CAGR outpaced the company's earnings growth over the same five-year period - Simply Wall St