The last three months have been tough on Northeast Community Bancorp, Inc. (NASDAQ:NECB) shareholders, who have seen the share price decline a rather worrying 35%. But the silver lining is the stock is up over five years. Unfortunately its return of 68% is below the market return of 122%.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Northeast Community Bancorp managed to grow its earnings per share at 39% a year. This EPS growth is higher than the 11% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.39.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. 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). 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. We note that for Northeast Community Bancorp the TSR over the last 5 years was 78%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Northeast Community Bancorp shareholders are up 20% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. This suggests the company might be improving over time. Is Northeast Community Bancorp cheap compared to other companies? These 3 valuation measures might help you decide.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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