78% earnings growth over 1 year has not materialized into gains for First Interstate BancSystem (NASDAQ:FIBK) shareholders over that period
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the First Interstate BancSystem, Inc. (NASDAQ:FIBK) share price is down 46% in the last year. That's well below the market return of 17%. To make matters worse, the returns over three years have also been really disappointing (the share price is 34% lower than three years ago). Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days. Of course, this share price action may well have been influenced by the 5.4% decline in the broader market, throughout the period.
After losing 3.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Check out our latest analysis for First Interstate BancSystem
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Even though the First Interstate BancSystem share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.
First Interstate BancSystem's dividend seems healthy to us, so we doubt that the yield is a concern for the market. The revenue trend doesn't seem to explain why the share price is down. Of course, it could simply be that it simply fell short of the market consensus expectations.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on First Interstate BancSystem
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for First Interstate BancSystem the TSR over the last 1 year was -43%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in First Interstate BancSystem had a tough year, with a total loss of 43% (including dividends), against a market gain of about 17%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with First Interstate BancSystem (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.
