Shareholders Of West Bancorporation (NASDAQ:WTBA) Must Be Happy With Their 45% Return

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the West Bancorporation, Inc. (NASDAQ:WTBA) share price is up 20% in the last five years, that's less than the market return. Zooming in, the stock is actually down 14% in the last year.

View our latest analysis for West Bancorporation

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 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, West Bancorporation achieved compound earnings per share (EPS) growth of 7.5% per year. The EPS growth is more impressive than the yearly share price gain of 4% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.95 also suggests market apprehension.

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. Dive deeper into the earnings by checking this interactive graph of West Bancorporation's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, West Bancorporation's TSR for the last 5 years was 45%, 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

West Bancorporation shareholders are down 9.7% for the year (even including dividends), but the market itself is up 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 8% 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

West Bancorporation is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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