By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Provident Bancorp, Inc. (NASDAQ:PVBC), which is up 74%, over three years, soundly beating the market return of 40% (not including dividends).
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).
Provident Bancorp was able to grow its EPS at 36% per year over three years, sending the share price higher. The average annual share price increase of 20% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Provident Bancorp’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren’t great for Provident Bancorp shares, which cost holders 12%, while the market was up about 2.6%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 20% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. Before forming an opinion on Provident Bancorp you might want to consider 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.
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 firstname.lastname@example.org. 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.