Shareholders in Prosperity Bancshares (NYSE:PB) are in the red if they invested a year ago
While not a mind-blowing move, it is good to see that the Prosperity Bancshares, Inc. (NYSE:PB) share price has gained 26% in the last three months. But that doesn't change the reality of under-performance over the last twelve months. The cold reality is that the stock has dropped 10% in one year, under-performing the market.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Prosperity Bancshares
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Unhappily, Prosperity Bancshares had to report a 11% decline in EPS over the last year. This change in EPS is remarkably close to the 10% decrease in the share price. So it seems that the market sentiment has not changed much, despite the weak results. Instead, the change in the share price seems to reduction in earnings per share, alone.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Prosperity Bancshares' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Prosperity Bancshares, it has a TSR of -6.8% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Prosperity Bancshares shareholders are down 6.8% for the year (even including dividends), but the market itself is up 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 1.4%, 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. It's always interesting to track share price performance over the longer term. But to understand Prosperity Bancshares better, we need to consider many other factors. For instance, we've identified 1 warning sign for Prosperity Bancshares that you should be aware of.
Prosperity Bancshares is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
