Bancorp (NASDAQ:TBBK) shareholders have earned a 20% CAGR over the last five years
The last three months have been tough on The Bancorp, Inc. (NASDAQ:TBBK) shareholders, who have seen the share price decline a rather worrying 37%. But in stark contrast, the returns over the last half decade have impressed. It's fair to say most would be happy with 144% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Bancorp
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, Bancorp 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 Bancorp share price has gained 111% in three years. In the same period, EPS is up 7.5% per year. Notably, the EPS growth has been slower than the annualised share price gain of 28% over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Bancorp has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Bancorp will grow revenue in the future.
A Different Perspective
The total return of 20% received by Bancorp shareholders over the last year isn't far from the market return of -20%. The silver lining is that longer term investors would have made a total return of 20% per year over half a decade. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Bancorp that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
