Should Salisbury Bancorp (NASDAQ:SAL) Be Disappointed With Their 19% Profit?

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Salisbury Bancorp, Inc. (NASDAQ:SAL) share price is up 19% in the last five years, that's less than the market return. Zooming in, the stock is actually down 13% in the last year.

View our latest analysis for Salisbury Bancorp

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Salisbury Bancorp achieved compound earnings per share (EPS) growth of 11% per year. The EPS growth is more impressive than the yearly share price gain of 4% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 8.97 also suggests market apprehension.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Salisbury Bancorp has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Salisbury Bancorp the TSR over the last 5 years was 38%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 24% in the last year, Salisbury Bancorp shareholders lost 11% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Salisbury Bancorp better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Salisbury Bancorp you should be aware of, and 1 of them is potentially serious.

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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This article by Simply Wall St is general in nature. 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.
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