Despite delivering investors losses of 28% over the past 1 year, CVB Financial (NASDAQ:CVBF) has been growing its earnings
The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the CVB Financial Corp. (NASDAQ:CVBF) share price slid 31% over twelve months. That's well below the market return of 14%. At least the damage isn't so bad if you look at the last three years, since the stock is down 3.5% in that time.
While the last year has been tough for CVB Financial shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
View our latest analysis for CVB Financial
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the CVB Financial share price fell, it actually saw its earnings per share (EPS) improve by 10%. It could be that the share price was previously over-hyped.
It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.
We don't see any weakness in the CVB Financial's dividend so the steady payout can't really explain the share price drop. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for CVB Financial in this interactive graph of future profit estimates.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, CVB Financial's TSR for the last 1 year was -28%, 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
CVB Financial shareholders are down 28% for the year (even including dividends), but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 1.3% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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.
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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.
