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Does Territorial Bancorp’s (NASDAQ:TBNK) Share Price Gain of 23% Match Its Business Performance?

Simply Wall St

The main point of investing for the long term is to make money. Better yet, you’d like to see the share price move up more than the market average. But Territorial Bancorp Inc. (NASDAQ:TBNK) has fallen short of that second goal, with a share price rise of 23% over five years, which is below the market return. Unfortunately the share price is down 11% in the last year.

View our latest analysis for Territorial Bancorp

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 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, Territorial Bancorp achieved compound earnings per share (EPS) growth of 6.7% per year. The EPS growth is more impressive than the yearly share price gain of 4.3% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

NasdaqGS:TBNK Past and Future Earnings, March 12th 2019
NasdaqGS:TBNK Past and Future Earnings, March 12th 2019

We know that Territorial Bancorp has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Territorial Bancorp the TSR over the last 5 years was 47%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Territorial Bancorp shareholders are down 7.4% for the year (even including dividends), but the market itself is up 1.4%. 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. Longer term investors wouldn’t be so upset, since they would have made 8.0%, each year, over five years. 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. Before spending more time on Territorial Bancorp it might be wise to click here to see if insiders have been buying or selling shares.

Of course Territorial Bancorp may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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 editorial-team@simplywallst.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.