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The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) share price is 82% higher than it was a year ago, much better than the market return of around 55% (not including dividends) in the same period. So that should have shareholders smiling. Zooming out, the stock is actually down 18% in the last three years.
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.
Over the last twelve months, Bank of N.T. Butterfield & Son actually shrank its EPS by 5.0%.
We don't think that the decline in earnings per share is a good measure of the business over the last twelve months. It makes sense to check some of the other fundamental data for an explanation of the share price rise.
We haven't seen Bank of N.T. Butterfield & Son increase dividend payments yet, so the yield probably hasn't helped drive the share higher. Revenue actually dropped 7.7% over last year. Usually that correlates with a lower share price, but let's face it, the gyrations of the market are sometimes only as clear as mud.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Bank of N.T. Butterfield & Son stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Bank of N.T. Butterfield & Son, it has a TSR of 94% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Bank of N.T. Butterfield & Son shareholders have gained 94% (in total) over the last year. And yes, that does include the dividend. That certainly beats the loss of about 1.9% per year over three years. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Bank of N.T. Butterfield & Son is showing 1 warning sign in our investment analysis , you should know about...
Of course Bank of N.T. Butterfield & Son may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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