Customers Bancorp's (NYSE:CUBI) five-year earnings growth trails the 46% YoY shareholder returns
Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. To wit, the Customers Bancorp, Inc. (NYSE:CUBI) share price has soared 502% over five years. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 52% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 25% in 90 days). Anyone who held for that rewarding ride would probably be keen to talk about it.
The past week has proven to be lucrative for Customers Bancorp investors, so let's see if fundamentals drove the company's five-year performance.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Customers Bancorp achieved compound earnings per share (EPS) growth of 17% per year. This EPS growth is lower than the 43% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Customers Bancorp's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Customers Bancorp hasn't been paying dividends, but its TSR of 572% exceeds its share price return of 502%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We're pleased to report that Customers Bancorp shareholders have received a total shareholder return of 37% over one year. However, the TSR over five years, coming in at 46% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Customers Bancorp better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Customers Bancorp you should be aware of.
Customers Bancorp is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Valuation is complex, but we're here to simplify it.
Discover if Customers Bancorp might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.