Shareholders in Territorial Bancorp (NASDAQ:TBNK) are in the red if they invested five years ago
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 will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Territorial Bancorp Inc. (NASDAQ:TBNK), since the last five years saw the share price fall 42%. And we doubt long term believers are the only worried holders, since the stock price has declined 26% over the last twelve months. The falls have accelerated recently, with the share price down 15% in the last three months.
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.
View our latest analysis for Territorial Bancorp
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During the unfortunate half decade during which the share price slipped, Territorial Bancorp actually saw its earnings per share (EPS) improve by 0.8% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Looking to other metrics might better explain the share price change.
We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. The revenue decline of 0.2% per year wouldn't have helped. So it seems weak revenue and dividend trends may have influenced the share price.
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?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Territorial Bancorp, it has a TSR of -28% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Territorial Bancorp shareholders are down 23% over twelve months (even including dividends), which isn't far from the market return of -22%. So last year was actually even worse than the last five years, which cost shareholders 5% per year. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Territorial Bancorp (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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