Investors more bullish on Community Trust Bancorp (NASDAQ:CTBI) this week as stock increases 6.5%, despite earnings trending downwards over past year

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. To wit, the Community Trust Bancorp, Inc. (NASDAQ:CTBI) share price is 50% higher than it was a year ago, much better than the market return of around 31% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 27% higher than it was three years ago.

Since the stock has added US$56m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Community Trust Bancorp

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.

Over the last twelve months, Community Trust Bancorp actually shrank its EPS by 4.1%.

Sometimes companies will sacrifice EPS in the short term for longer term gains; and in that case we may be able to find other positives. It makes sense to check some of the other fundamental data for an explanation of the share price rise.

Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling Community Trust Bancorp stock, you should check out this free report showing analyst 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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Community Trust Bancorp's TSR for the last 1 year was 57%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Community Trust Bancorp has rewarded shareholders with a total shareholder return of 57% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Community Trust Bancorp better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Community Trust Bancorp you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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