Did PCSB Financial's (NASDAQ:PCSB) Share Price Deserve to Gain 53%?
Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the PCSB Financial Corporation (NASDAQ:PCSB) share price is up 53% in the last year, clearly besting the market return of around 37% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 13% lower than it was three years ago.
See our latest analysis for PCSB Financial
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 last year PCSB Financial grew its earnings per share (EPS) by 56%. This EPS growth is reasonably close to the 53% increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. It makes intuitive sense that the share price and EPS would grow at similar rates.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that PCSB Financial has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on PCSB Financial's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Pleasingly, PCSB Financial's total shareholder return last year was 54%. That includes the value of the dividend. What is absolutely clear is that is far preferable to the dismal 3% average annual loss suffered over the last three years. It could well be that the business has turned around -- or else regained the confidence of investors. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for PCSB Financial you should know about.
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 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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