2.9% earnings growth over 5 years has not materialized into gains for Kentucky First Federal Bancorp (NASDAQ:KFFB) shareholders over that period

By
Simply Wall St
Published
March 21, 2022
NasdaqGM:KFFB
Source: Shutterstock

Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Kentucky First Federal Bancorp (NASDAQ:KFFB), since the last five years saw the share price fall 28%. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days.

With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Kentucky First Federal Bancorp

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Kentucky First Federal Bancorp became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

The steady dividend doesn't really explain why the share price is down. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.

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
NasdaqGM:KFFB Earnings and Revenue Growth March 21st 2022

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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 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. In the case of Kentucky First Federal Bancorp, it has a TSR of -5.8% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Kentucky First Federal Bancorp has rewarded shareholders with a total shareholder return of 7.2% in the last twelve months. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Even so, be aware that Kentucky First Federal Bancorp is showing 2 warning signs in our investment analysis , you should know about...

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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