The total return for Limestone Bancorp (NASDAQ:LMST) investors has risen faster than earnings growth over the last three years

Limestone Bancorp, Inc. (NASDAQ:LMST) shareholders might be concerned after seeing the share price drop 11% in the last week. But that doesn't change the fact that the returns over the last three years have been very strong. In fact, the share price is up a full 118% compared to three years ago. So the recent fall in the share price should be viewed in that context. If the business can perform well for years to come, then the recent drop could be an opportunity.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Limestone Bancorp

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

Limestone Bancorp was able to grow its EPS at 20% per year over three years, sending the share price higher. This EPS growth is lower than the 30% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That's not necessarily surprising considering the three-year track record of earnings growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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?

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Limestone Bancorp, it has a TSR of 121% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Limestone Bancorp shareholders have received a total shareholder return of 26% over the last year. That's including the dividend. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Limestone Bancorp is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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 Limestone Bancorp?

NasdaqCM:LMST

Limestone Bancorp

Limestone Bancorp, Inc. operates as the bank holding company for Limestone Bank, Inc.Show more

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Rewards

• Trading at 27.3% below our estimate of its fair value

• Earnings grew by 22.8% over the past year

Risks

• Earnings are forecast to decline by an average of 0.3% per year for the next 3 years

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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.