Stock Analysis

Earnings are growing at First Busey (NASDAQ:BUSE) but shareholders still don't like its prospects

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NasdaqGS:BUSE
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Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in First Busey Corporation (NASDAQ:BUSE), since the last five years saw the share price fall 20%. Unfortunately the share price momentum is still quite negative, with prices down 9.4% in thirty days.

If the past week is anything to go by, investor sentiment for First Busey isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out the opportunities and risks within the US Banks industry.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the unfortunate half decade during which the share price slipped, First Busey actually saw its earnings per share (EPS) improve by 7.7% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Generally speaking we'd expect to see stronger share price increases on the back of sustained EPS growth, but other metrics may hold a clue to why the share price performance is relatively modest.

Revenue is actually up 8.1% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
NasdaqGS:BUSE Earnings and Revenue Growth December 8th 2022

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think First Busey will earn in the future (free profit forecasts).

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, First Busey's TSR for the last 5 years was -4.5%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, First Busey shareholders can take comfort that , including dividends,their trailing twelve month loss of 3.2% wasn't as bad as the market loss of around 20%. Given the total loss of 0.9% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

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 US exchanges.

What are the risks and opportunities for First Busey?

First Busey Corporation operates as the bank holding company for Busey Bank that provides retail and commercial banking products and services to individual, corporate, institutional, and governmental customers in the United States.

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Rewards

  • Trading at 41.8% below our estimate of its fair value

  • Earnings are forecast to grow 7.15% per year

  • Earnings have grown 10.3% per year over the past 5 years

Risks

No risks detected for BUSE from our risks checks.

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