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Does Northwest Bancshares' (NASDAQ:NWBI) Share Price Gain of 20% Match Its Business Performance?

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Simply Wall St
·3 min read
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We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. For example, the Northwest Bancshares, Inc. (NASDAQ:NWBI), share price is up over the last year, but its gain of 20% trails the market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 12% in three years.

Check out our latest analysis for Northwest Bancshares

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Over the last twelve months, Northwest Bancshares actually shrank its EPS by 41%.

So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Absent any improvement, we don't think a thirst for dividends is pushing up the Northwest Bancshares' share price. And at a glance the revenue growth does not impress, though a closer look at revenue trends may reveal some form of insight.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

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. This free report showing analyst forecasts should help you form a view on Northwest Bancshares

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Northwest Bancshares' TSR for the last year was 29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Northwest Bancshares shareholders are up 29% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 6% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Northwest Bancshares better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Northwest Bancshares , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.