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Independent Bank Corporation (NASDAQ:IBCP) shareholders might be concerned after seeing the share price drop 11% in the last quarter. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. To wit, it had solidly beat the market, up 47%.
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 the last year Independent Bank grew its earnings per share (EPS) by 81%. It's fair to say that the share price gain of 47% did not keep pace with the EPS growth. So it seems like the market has cooled on Independent Bank, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 6.21.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Independent Bank has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Independent Bank's TSR for the last year was 54%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Independent Bank has rewarded shareholders with a total shareholder return of 54% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 9%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should learn about the 3 warning signs we've spotted with Independent Bank (including 1 which makes us a bit uncomfortable) .
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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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