Plumas Bancorp (NASDAQ:PLBC) shareholders have earned a 14% CAGR over the last three years
By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, Plumas Bancorp (NASDAQ:PLBC) shareholders have seen the share price rise 38% over three years, well in excess of the market return (20%, not including dividends).
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Plumas Bancorp
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Plumas Bancorp was able to grow its EPS at 11% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 11% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Au contraire, the share price change has arguably mimicked the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Plumas Bancorp's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Plumas Bancorp the TSR over the last 3 years was 47%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
The total return of 20% received by Plumas Bancorp shareholders over the last year isn't far from the market return of -22%. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. 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. For instance, we've identified 2 warning signs for Plumas Bancorp that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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