One Software Technologies Ltd. (TLV: ONE) shareholders saw the share price fall by 10% over the month. But that doesn’t change the fact that returns over the past five years have been very strong. In fact, the stock price is 266% higher today. So while it’s never fun to see a stock price drop, it’s important to consider a longer time horizon. Ultimately, trade performance will determine whether the stock price continues its positive long-term trend.
Given that long-term performance has been good but there has been a recent pullback of 4.8%, let’s see if the fundamentals match the stock price.
While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).
In five years of share price growth, One Software Technologies has achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is less than the average annual share price increase of 30%. It is therefore fair to assume that the market has a better opinion of the company than five years ago. That’s not necessarily surprising given five years of earnings growth.
The graph below illustrates the evolution of EPS over time (reveal the exact values by clicking on the image).
Dive deeper into key One Software Technologies metrics by viewing this interactive chart from One Software Technologies profit, turnover and cash flow.
What about dividends?
In addition to measuring share price performance, investors should also consider total shareholder return (TSR). TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It can be said that the TSR gives a more complete picture of the return generated by a stock. In the case of One Software Technologies, it has posted a TSR of 329% over the last 5 years. This exceeds the performance of its share price that we mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!
A different perspective
While the broader market gained about 0.2% last year, One Software Technologies shareholders lost 3.6% (including dividends). Even good stock prices sometimes drop, but we want to see improvements in a company’s fundamentals before we get too interested. Longer-term investors wouldn’t be so upset, as they would have gained 34%, every year, over five years. If fundamentals continue to point to sustainable long-term growth, the current sell-off could be an opportunity to consider. It is always interesting to follow the evolution of the share price over the long term. But to better understand One Software Technologies, we need to consider many other factors. Even so, know that One Software Technologies presents 1 warning sign in our investment analysis you should know…
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Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on IL exchanges.
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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.