U.S. Markets open in 22 mins
  • S&P Futures

    4,076.00
    -14.00 (-0.34%)
     
  • Dow Futures

    33,972.00
    -184.00 (-0.54%)
     
  • Nasdaq Futures

    12,134.25
    -17.75 (-0.15%)
     
  • Russell 2000 Futures

    1,934.90
    -4.50 (-0.23%)
     
  • Crude Oil

    78.91
    +0.04 (+0.05%)
     
  • Gold

    1,945.10
    -0.20 (-0.01%)
     
  • Silver

    23.66
    -0.18 (-0.74%)
     
  • EUR/USD

    1.0912
    +0.0046 (+0.4256%)
     
  • 10-Yr Bond

    3.4680
    -0.0610 (-1.73%)
     
  • Vix

    19.59
    -0.35 (-1.76%)
     
  • GBP/USD

    1.2342
    +0.0025 (+0.2036%)
     
  • USD/JPY

    129.3130
    -0.7550 (-0.5805%)
     
  • BTC-USD

    23,095.52
    -7.72 (-0.03%)
     
  • CMC Crypto 200

    523.27
    +4.48 (+0.86%)
     
  • FTSE 100

    7,790.27
    +18.57 (+0.24%)
     
  • Nikkei 225

    27,346.88
    +19.77 (+0.07%)
     

First United's (NASDAQ:FUNC) investors will be pleased with their respectable 33% return over the last five years

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But First United Corporation (NASDAQ:FUNC) has fallen short of that second goal, with a share price rise of 16% over five years, which is below the market return. Zooming in, the stock is up just 3.7% in the last year.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for First United

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. 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, First United achieved compound earnings per share (EPS) growth of 33% per year. This EPS growth is higher than the 3% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 5.30 also suggests market apprehension.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

This free interactive report on First United's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of First United, it has a TSR of 33% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that First United shareholders have received a total shareholder return of 6.9% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 6%. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that First United is showing 1 warning sign in our investment analysis , you should know about...

But note: First United may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here