There’s no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you’re going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the U.S. Bancorp (NYSE:USB) share price is up 25% in the last year, that falls short of the market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 21% in three years.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for U.S. 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).
Over the last twelve months, U.S. Bancorp actually shrank its EPS by 11%.
Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
We note that the most recent dividend payment is higher than the payment a year ago, so that may have assisted the share price. Income-seeking investors probably helped bid up the stock price. Furthermore, the revenue growth of 16% probably also encouraged buyers.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. If you are thinking of buying or selling U.S. Bancorp stock, you should check out this free report showing analyst profit forecasts.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for U.S. Bancorp the TSR over the last 1 year was 32%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We’re pleased to report that U.S. Bancorp shareholders have received a total shareholder return of 32% over one year. That’s including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.9% per year), it would seem that the stock’s performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of U.S. Bancorp by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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.
Source: finance.yahoo.com
