Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the First BanCorp. (NYSE:FBP) share price is up 79% in the last 5 years, clearly besting the market return of around 49% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 20% in the last year , including dividends .
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Over half a decade, First BanCorp managed to grow its earnings per share at 23% a year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 9.70 also suggests market apprehension.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how First BanCorp has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling First BanCorp stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for First BanCorp the TSR over the last 5 years was 82%, 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
It's good to see that First BanCorp has rewarded shareholders with a total shareholder return of 20% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how First BanCorp scores on these 3 valuation metrics.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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