The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. Take, for example Customers Bancorp, Inc. (NYSE:CUBI). Its share price is already up an impressive 261% in the last twelve months. Also pleasing for shareholders was the 77% gain in the last three months. The longer term returns have not been as good, with the stock price only 11% higher than it was three years ago.
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 the last year Customers Bancorp grew its earnings per share (EPS) by 81%. The share price gain of 261% certainly outpaced the EPS growth. 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 know that Customers Bancorp has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Customers Bancorp's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Customers Bancorp hasn't been paying dividends, but its TSR of 303% exceeds its share price return of 261%, 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 303% over the last year. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 3 warning signs for Customers Bancorp (1 is a bit unpleasant!) that you should be aware of before investing here.
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. 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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