When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the C&F Financial Corporation (NASDAQ:CFFI) share price is up 42% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 7.0%.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During five years of share price growth, C&F Financial achieved compound earnings per share (EPS) growth of 7.1% per year. This EPS growth is remarkably close to the 7.3% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into C&F Financial's key metrics by checking this interactive graph of C&F Financial's earnings, revenue and cash flow.
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. 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 5 years was 65%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
C&F Financial provided a TSR of 10% over the year (including dividends) . That's fairly close to the broader market return. We should note here that the five-year TSR is more impressive, at 10% 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 C&F Financial 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 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.
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.
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