First Citizens BancShares' (NASDAQ:FCNC.A) five-year earnings growth trails the respectable shareholder returns

By
Simply Wall St
Published
April 20, 2022
NasdaqGS:FCNC.A
Source: Shutterstock

First Citizens BancShares, Inc. (NASDAQ:FCNC.A) shareholders might be concerned after seeing the share price drop 27% in the last quarter. On the bright side the share price is up over the last half decade. However we are not very impressed because the share price is only up 89%, less than the market return of 102%.

Since the stock has added US$385m 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 Citizens BancShares

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.

Over half a decade, First Citizens BancShares managed to grow its earnings per share at 12% a year. So the EPS growth rate is rather close to the annualized share price gain of 14% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
NasdaqGS:FCNC.A Earnings Per Share Growth April 20th 2022

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. Dive deeper into the earnings by checking this interactive graph of First Citizens BancShares' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for First Citizens BancShares the TSR over the last 5 years was 92%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in First Citizens BancShares had a tough year, with a total loss of 21% (including dividends), against a market gain of about 2.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for First Citizens BancShares (of which 1 shouldn't be ignored!) you should know about.

First Citizens BancShares is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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