Univest Financial (NASDAQ:UVSP) shareholders YoY returns are lagging the company's 173% one-year earnings growth

By
Simply Wall St
Published
November 30, 2021
NasdaqGS:UVSP
Source: Shutterstock

The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Univest Financial Corporation (NASDAQ:UVSP) share price is 47% higher than it was a year ago, much better than the market return of around 20% (not including dividends) in the same period. That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 16% higher than it was three years ago.

In light of the stock dropping 9.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

See our latest analysis for Univest Financial

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Univest Financial was able to grow EPS by 173% in the last twelve months. It's fair to say that the share price gain of 47% did not keep pace with the EPS growth. So it seems like the market has cooled on Univest Financial, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.10.

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

earnings-per-share-growth
NasdaqGS:UVSP Earnings Per Share Growth December 1st 2021

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. It might be well worthwhile taking a look at our free report on Univest Financial's earnings, revenue and cash flow.

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 Univest Financial the TSR over the last 1 year was 51%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Univest Financial shareholders have received a total shareholder return of 51% over the last year. And that does include the dividend. That's better than the annualised return of 1.7% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that Univest Financial is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Univest Financial is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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