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One way to deal with stock volatility is to ensure you have a properly diverse portfolio. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is C&F Financial Corporation (NASDAQ:CFFI), which saw its share price increase 51% in the last year, slightly above the market return of around 50% (not including dividends). Zooming out, the stock is actually down 18% in the last three years.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
C&F Financial was able to grow EPS by 31% in the last twelve months. This EPS growth is significantly lower than the 51% increase in the share price. This indicates that the market is now more optimistic about the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on C&F Financial's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, C&F Financial's TSR for the last year was 57%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
C&F Financial provided a TSR of 57% over the year (including dividends). That's fairly close to the broader market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 7%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for C&F Financial you should know about.
We will like C&F Financial 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.
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. 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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