Valley National Bancorp (NASDAQ:VLY) jumps 4.7% this week, though earnings growth is still tracking behind one-year shareholder returns
Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Valley National Bancorp (NASDAQ:VLY) share price is up 65% in the last 1 year, clearly besting the market return of around 34% (not including dividends). That's a solid performance by our standards! However, the longer term returns haven't been so impressive, with the stock up just 15% in the last three years.
Since the stock has added US$251m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Check out our latest analysis for Valley National Bancorp
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Valley National Bancorp was able to grow EPS by 37% in the last twelve months. The share price gain of 65% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Valley National Bancorp has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Valley National Bancorp will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Valley National Bancorp's TSR for the last 1 year was 72%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Valley National Bancorp has rewarded shareholders with a total shareholder return of 72% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Valley National Bancorp better, we need to consider many other factors. Take risks, for example - Valley National Bancorp has 1 warning sign we think you should be aware of.
Of course Valley National Bancorp may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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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