When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Sierra Bancorp (NASDAQ:BSRR) share price is up 51% in the last five years, that's less than the market return. Unfortunately the share price is down 8.7% in the last year.
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 five years of share price growth, Sierra Bancorp achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is higher than the 9% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 10.82 also suggests market apprehension.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Sierra Bancorp's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Sierra Bancorp's TSR for the last 5 years was 73%, 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
Sierra Bancorp shareholders are down 5.2% for the year (even including dividends), but the market itself is up 22%. 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 12% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Sierra Bancorp you should know about.
If you are like me, then you will 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 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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