If you buy and hold a stock for many years, you’d hope to be making a profit. Better yet, you’d like to see the share price move up more than the market average. Unfortunately for shareholders, while the Auburn National Bancorporation, Inc. (NASDAQ:AUBN) share price is up 30% in the last five years, that’s less than the market return. The last year has been disappointing, with the stock price down 8.5% in that time.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Auburn National Bancorporation achieved compound earnings per share (EPS) growth of 4.4% per year. This EPS growth is reasonably close to the 5.3% average annual increase in the share price. 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.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Auburn National Bancorporation’s key metrics by checking this interactive graph of Auburn National Bancorporation’s earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Auburn National Bancorporation, it has a TSR of 51% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Auburn National Bancorporation shareholders are down 6.3% for the year (even including dividends), but the market itself is up 3.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 8.5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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.
But note: Auburn National Bancorporation 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.