Positive earnings growth hasn't been enough to get Eagle Bancorp (NASDAQ:EGBN) shareholders a favorable return over the last five years
Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Eagle Bancorp, Inc. (NASDAQ:EGBN) shareholders for doubting their decision to hold, with the stock down 30% over a half decade. But it's up 5.5% in the last week. The buoyant market could have helped drive the share price pop, since stocks are up 3.5% in the same period.
While the stock has risen 5.5% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Check out our latest analysis for Eagle 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
While the share price declined over five years, Eagle Bancorp actually managed to increase EPS by an average of 8.1% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.
Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.
In contrast to the share price, revenue has actually increased by 4.6% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Eagle Bancorp, it has a TSR of -23% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While it's never nice to take a loss, Eagle Bancorp shareholders can take comfort that , including dividends,their trailing twelve month loss of 15% wasn't as bad as the market loss of around 23%. Given the total loss of 4% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. It's always interesting to track share price performance over the longer term. But to understand Eagle Bancorp better, we need to consider many other factors. For instance, we've identified 1 warning sign for Eagle 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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