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Cullen/Frost Bankers (NYSE:CFR) sheds 3.3% this week, as yearly returns fall more in line with earnings growth

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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Cullen/Frost Bankers, Inc. (NYSE:CFR) share price is up 48% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 12% in the last year.

Since the long term performance has been good but there's been a recent pullback of 3.3%, let's check if the fundamentals match the share price.

See our latest analysis for Cullen/Frost Bankers

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Cullen/Frost Bankers achieved compound earnings per share (EPS) growth of 7.3% per year. So the EPS growth rate is rather close to the annualized share price gain of 8% per year. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

We know that Cullen/Frost Bankers has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Cullen/Frost Bankers' TSR for the last 5 years was 70%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Cullen/Frost Bankers shareholders have received a total shareholder return of 15% over one year. Of course, that includes the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course Cullen/Frost Bankers may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.