Did The Underlying Business Drive SVB Financial Group's (NASDAQ:SIVB) Lovely 504% Share Price Gain?

By
Simply Wall St
Published
May 11, 2021
NasdaqGS:SIVB
Source: Shutterstock

For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. For example, the SVB Financial Group (NASDAQ:SIVB) share price is up a whopping 504% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. It's also up 17% in about a month. We note that SVB Financial Group reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.

We love happy stories like this one. The company should be really proud of that performance!

Check out our latest analysis for SVB Financial Group

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).

During five years of share price growth, SVB Financial Group achieved compound earnings per share (EPS) growth of 36% per year. So the EPS growth rate is rather close to the annualized share price gain of 43% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
NasdaqGS:SIVB Earnings Per Share Growth May 12th 2021

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of SVB Financial Group's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that SVB Financial Group shareholders have received a total shareholder return of 244% over one year. That's better than the annualised return of 43% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 2 warning signs for SVB Financial Group you should be aware of.

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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.