When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Flagstar Bancorp, Inc. (NYSE:FBC) stock is up an impressive 131% over the last five years.
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.
Over half a decade, Flagstar Bancorp managed to grow its earnings per share at 30% a year. This EPS growth is higher than the 18% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.65.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Flagstar 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.
A Different Perspective
Flagstar Bancorp's TSR for the year was broadly in line with the market average, at 14%. We should note here that the five-year TSR is more impressive, at 18% per year. Although the share price growth has slowed, the longer term story points to a business well worth watching. If you would like to research Flagstar Bancorp in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like Flagstar Bancorp 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.
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 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. Thank you for reading.