First Investment Bank AD's (BUL:FIB) three-year earnings growth trails the 21% YoY shareholder returns

By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the First Investment Bank AD (BUL:FIB) share price is up 78% in the last three years, clearly besting the market return of around 35% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 40%.

Since the stock has added лв48m 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 First Investment Bank AD

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, First Investment Bank AD achieved compound earnings per share growth of 8.5% per year. This EPS growth is lower than the 21% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on First Investment Bank AD's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that First Investment Bank AD shareholders have received a total shareholder return of 40% over the last year. There's no doubt those recent returns are much better than the TSR loss of 0.6% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand First Investment Bank AD better, we need to consider many other factors. Take risks, for example - First Investment Bank AD has 1 warning sign we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Bulgarian 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.