Valley National Bancorp (NASDAQ:VLY) shareholders have endured a 18% loss from investing in the stock a year ago
It's easy to feel disappointed if you buy a stock that goes down. But in the short term the market is a voting machine, and the share price movements may not reflect the underlying business performance. The Valley National Bancorp (NASDAQ:VLY) is down 20% over a year, but the total shareholder return is -18% once you include the dividend. That's better than the market which declined 18% over the last year. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 1.3% in three years. Furthermore, it's down 16% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 17% in the same period.
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.
Check out our latest analysis for Valley National 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).
During the unfortunate twelve months during which the Valley National Bancorp share price fell, it actually saw its earnings per share (EPS) improve by 12%. It could be that the share price was previously over-hyped.
The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.
Valley National Bancorp's dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that Valley National Bancorp has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Valley National Bancorp
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Valley National Bancorp the TSR over the last 1 year was -18%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
The total return of 18% received by Valley National Bancorp shareholders over the last year isn't far from the market return of -18%. Longer term investors wouldn't be so upset, since they would have made 1.9%, 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. Case in point: We've spotted 3 warning signs for Valley National Bancorp you should be aware of.
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.
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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.
