Summit State Bank's (NASDAQ:SSBI) three-year total shareholder returns outpace the underlying earnings growth

It hasn't been the best quarter for Summit State Bank (NASDAQ:SSBI) shareholders, since the share price has fallen 19% in that time. But don't let that distract from the very nice return generated over three years. In the last three years the share price is up, 92%: better than the market.

Since the long term performance has been good but there's been a recent pullback of 14%, let's check if the fundamentals match the share price.

View our latest analysis for Summit State Bank

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Summit State Bank was able to grow its EPS at 38% per year over three years, sending the share price higher. This EPS growth is higher than the 24% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.48.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. 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 Summit State Bank, it has a TSR of 113% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 7.3% in the twelve months, Summit State Bank shareholders did even worse, losing 11% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 6% 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. 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. To that end, you should be aware of the 1 warning sign we've spotted with Summit State Bank .

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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 Summit State Bank?

NasdaqGM:SSBI

Summit State Bank

Summit State Bank provides various banking products and services to individuals and businesses primarily in Sonoma County, California.Show more

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Rewards

• Trading at 60.5% below our estimate of its fair value

• Earnings grew by 15.4% over the past year

Risks

• Does not have a meaningful market cap ($96M)

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Share Price

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1Y Return

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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.