The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by People's United Financial, Inc. (NASDAQ:PBCT) shareholders over the last year, as the share price declined 22%. That's disappointing when you consider the market returned 2.6%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 6.8% in three years. Even worse, it's down 10% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Even though the People's United Financial share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped. It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.
People's United Financial's dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Unless, of course, the market was expecting a revenue uptick.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that People's United Financial has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling People's United Financial stock, you should check out this free report showing analyst 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of People's United Financial, it has a TSR of -19% for the last 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
People's United Financial shareholders are down 19% for the year (even including dividends), but the market itself is up 2.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 3.7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
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.
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.