South State Corporation (NASDAQ:SSB) shareholders should be happy to see the share price up 14% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 28% in the last three years, falling well short of the market return.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, South State’s earnings per share (EPS) dropped by 34% each year. In comparison the 11% compound annual share price decline isn’t as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 51.10, it’s fair to say the market sees a brighter future for the business.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, South State’s TSR for the last 3 years was -24%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 25% in the last year, South State shareholders lost 21% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3.3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It’s always interesting to track share price performance over the longer term. But to understand South State better, we need to consider many other factors. For example, we’ve discovered 4 warning signs for South State (1 can’t be ignored!) that you should be aware of before investing here.
South State is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.
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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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