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When we invest, we’re generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Southern Missouri Bancorp share price has climbed 85% in five years, easily topping the market return of 43% (ignoring dividends).
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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, Southern Missouri Bancorp managed to grow its earnings per share at 15% a year. So the EPS growth rate is rather close to the annualized share price gain of 13% per year. Therefore one could conclude that sentiment towards the shares hasn’t morphed very much. Rather, the share price has approximately tracked EPS growth.
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Southern Missouri Bancorp’s TSR for the last 5 years was 100%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Southern Missouri Bancorp shareholders are down 17% for the year (even including dividends), but the market itself is up 7.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Southern Missouri Bancorp you might want to consider these 3 valuation metrics.
We will like Southern Missouri Bancorp better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.