Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Customers Bancorp, Inc. (NYSE:CUBI) share price had more than doubled in just one year - up 278%. On top of that, the share price is up 49% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Also impressive, the stock is up 162% over three years, making long term shareholders happy, too.
Since the stock has added US$270m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
Customers Bancorp was able to grow EPS by 186% in the last twelve months. This EPS growth is significantly lower than the 278% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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 Customers Bancorp's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered Customers Bancorp's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Customers Bancorp hasn't been paying dividends, but its TSR of 323% exceeds its share price return of 278%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's nice to see that Customers Bancorp shareholders have received a total shareholder return of 323% over the last year. That gain is better than the annual TSR over five years, which is 20%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 3 warning signs for Customers Bancorp (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Customers Bancorp is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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