When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of United Security Bancshares (NASDAQ:UBFO) stock is up an impressive 115% over the last five years.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, United Security Bancshares achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is remarkably close to the 17% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on United Security Bancshares's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, United Security Bancshares's TSR for the last 5 years was 135%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
United Security Bancshares shareholders are up 15% for the year (even including dividends) . But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 19% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. Before spending more time on United Security Bancshares it might be wise to click here to see if insiders have been buying or selling shares.
But note: United Security Bancshares may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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