Hope Bancorp (NASDAQ:HOPE) investors are sitting on a loss of 15% if they invested five years ago
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Hope Bancorp, Inc. (NASDAQ:HOPE) shareholders for doubting their decision to hold, with the stock down 31% over a half decade.
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.
See our latest analysis for Hope Bancorp
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
While the share price declined over five years, Hope Bancorp actually managed to increase EPS by an average of 8.9% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.
Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.
The steady dividend doesn't really explain why the share price is down. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Hope Bancorp has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Hope Bancorp will earn in the future (free 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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Hope Bancorp's TSR for the last 5 years was -15%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Hope Bancorp shareholders are down 18% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 13%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Hope Bancorp better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Hope Bancorp you should know about.
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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.
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