Western Alliance Bancorporation's (NYSE:WAL) investors will be pleased with their favorable 84% return over the last five years
If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Western Alliance Bancorporation (NYSE:WAL) share price is up 67% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 12%.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Western Alliance Bancorporation
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 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.
Over half a decade, Western Alliance Bancorporation managed to grow its earnings per share at 15% a year. The EPS growth is more impressive than the yearly share price gain of 11% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.25.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Western Alliance Bancorporation's 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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Western Alliance Bancorporation's TSR for the last 5 years was 84%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Western Alliance Bancorporation shareholders gained a total return of 16% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 13% over half a decade It is possible that returns will improve along with the business fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Western Alliance Bancorporation that 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 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.
