Some Eltek Ltd. (NASDAQ:ELTK) shareholders are probably rather concerned to see the share price fall 46% over the last three months. But that doesn't change the fact that the returns over the last half decade have been spectacular. In that time, the share price has soared some 687% higher! So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. We love happy stories like this one. The company should be really proud of that performance!

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Eltek

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During the last half decade, Eltek became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Eltek share price has gained 53% in three years. During the same period, EPS grew by 18% each year. That makes the EPS growth rather close to the annualized share price gain of 15% over the same period. So you could reasonably conclude that investor sentiment towards the stock has remained pretty steady, over time. Arguably the share price is reflecting the earnings per share.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Eltek has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Eltek the TSR over the last 5 years was 732%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Eltek shareholders have received a total shareholder return of 175% over one year. That's including the dividend. That's better than the annualised return of 53% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Eltek better, we need to consider many other factors. Even so, be aware that Eltek is showing 4 warning signs in our investment analysis , you should know about...

We will like Eltek 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 American exchanges.

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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.