Investors who have held Trustmark (NASDAQ:TRMK) over the last three years have watched its earnings decline along with their investment
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Trustmark Corporation (NASDAQ:TRMK) shareholders have had that experience, with the share price dropping 11% in three years, versus a market return of about 33%.
While the stock has risen 4.3% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
View our latest analysis for Trustmark
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Trustmark saw its EPS decline at a compound rate of 2.5% per year, over the last three years. The share price decline of 4% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. As it happens, Trustmark's TSR for the last 3 years was -1.8%, 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
While it's never nice to take a loss, Trustmark shareholders can take comfort that , including dividends,their trailing twelve month loss of 2.1% wasn't as bad as the market loss of around 18%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.0% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Before spending more time on Trustmark it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
