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Investors Who Bought Cortland Bancorp (NASDAQ:CLDB) Shares Five Years Ago Are Now Up 95%

Simply Wall St

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When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Cortland Bancorp (NASDAQ:CLDB) shareholders have enjoyed a 95% share price rise over the last half decade, well in excess of the market return of around 38% (not including dividends).

Check out our latest analysis for Cortland 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.

Over half a decade, Cortland Bancorp managed to grow its earnings per share at 34% a year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.62 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

NasdaqCM:CLDB Past and Future Earnings, June 13th 2019
NasdaqCM:CLDB Past and Future Earnings, June 13th 2019

Dive deeper into Cortland Bancorp's key metrics by checking this interactive graph of Cortland Bancorp'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Cortland Bancorp, it has a TSR of 115% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Cortland Bancorp had a tough year, with a total loss of 6.7% (including dividends), against a market gain of about 2.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 17%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on Cortland Bancorp it might be wise to click here to see if insiders have been buying or selling shares.

We will like Cortland Bancorp 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.