Coastal Financial (NASDAQ:CCB) shareholders have earned a 39% CAGR over the last three years
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. For instance the Coastal Financial Corporation (NASDAQ:CCB) share price is 171% higher than it was three years ago. Most would be happy with that. Also pleasing for shareholders was the 19% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 9.1% in 90 days).
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Coastal Financial
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.
Coastal Financial was able to grow its EPS at 47% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 39% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.
The image below shows how EPS has 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. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Coastal Financial's earnings, revenue and cash flow.
A Different Perspective
Coastal Financial shareholders are up 3.8% for the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 20% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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 example, we've discovered 1 warning sign for Coastal Financial that you should be aware of before investing here.
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.
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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