Valley National Bancorp (NASDAQ:VLY) stock falls 3.1% in past week as three-year earnings and shareholder returns continue downward trend

For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Valley National Bancorp (NASDAQ:VLY) shareholders have had that experience, with the share price dropping 50% in three years, versus a market return of about 19%.

After losing 3.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Valley National Bancorp

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Valley National Bancorp saw its EPS decline at a compound rate of 5.5% per year, over the last three years. The share price decline of 21% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 8.41.

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

This free interactive report on Valley National Bancorp's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Valley National Bancorp the TSR over the last 3 years was -43%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Valley National Bancorp had a tough year, with a total loss of 6.3% (including dividends), against a market gain of about 24%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Valley National Bancorp better, we need to consider many other factors. For example, we've discovered 2 warning signs for Valley National Bancorp that you should be aware of before investing here.

Of course Valley National Bancorp may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.