Earnings growth of 0.5% over 1 year hasn't been enough to translate into positive returns for First Commonwealth Financial (NYSE:FCF) shareholders
Most people feel a little frustrated if a stock they own goes down in price. But in the short term the market is a voting machine, and the share price movements may not reflect the underlying business performance. The First Commonwealth Financial Corporation (NYSE:FCF) is down 10% over a year, but the total shareholder return is -7.5% once you include the dividend. And that total return actually beats the market decline of 19%. Taking the longer term view, the stock fell 8.5% over the last three years.
After losing 6.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
See our latest analysis for First Commonwealth Financial
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
During the unfortunate twelve months during which the First Commonwealth Financial share price fell, it actually saw its earnings per share (EPS) improve by 0.5%. It could be that the share price was previously over-hyped.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.
First Commonwealth Financial's revenue is actually up 3.2% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think First Commonwealth Financial will earn in the future (free profit forecasts).
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of First Commonwealth Financial, it has a TSR of -7.5% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Although it hurts that First Commonwealth Financial returned a loss of 7.5% in the last twelve months, the broader market was actually worse, returning a loss of 19%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.5% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Before forming an opinion on First Commonwealth Financial you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
We will like First Commonwealth Financial better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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