International Bancshares' (NASDAQ:IBOC) five-year total shareholder returns outpace the underlying earnings growth

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the International Bancshares Corporation (NASDAQ:IBOC) share price is up 99% in the last five years, slightly above the market return. Zooming in, the stock is up a respectable 13% in the last year.

Although International Bancshares has shed US$190m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, International Bancshares managed to grow its earnings per share at 18% a year. This EPS growth is higher than the 15% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 9.40 also suggests market apprehension.

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 International Bancshares' 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, International Bancshares' TSR for the last 5 years was 128%, 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

We're pleased to report that International Bancshares shareholders have received a total shareholder return of 16% over one year. And that does include the dividend. However, the TSR over five years, coming in at 18% per year, is even more impressive. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course International Bancshares may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.