The main point of investing for the long term is to make money. Furthermore, you’d generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Waterstone Financial, Inc. (NASDAQ:WSBF) share price is up 36% in the last five years, that’s less than the market return. Over the last twelve months the stock price has risen a very respectable 7.1%.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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).
Over half a decade, Waterstone Financial managed to grow its earnings per share at 28% a year. The EPS growth is more impressive than the yearly share price gain of 6.4% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Waterstone Financial’s earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Waterstone Financial’s TSR for the last 5 years was 67%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Waterstone Financial shareholders gained a total return of 13% during the year. Unfortunately this falls short of the market return. On the bright side, that’s still a gain, and it’s actually better than the average return of 11% over half a decade This suggests the company might be improving over time. 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. Take risks, for example – Waterstone Financial has 1 warning sign we think you should be aware of.
Of course Waterstone Financial 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 US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.