Positive earnings growth hasn't been enough to get National Bank Holdings (NYSE:NBHC) shareholders a favorable return over the last three years

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term National Bank Holdings Corporation (NYSE:NBHC) shareholders have had that experience, with the share price dropping 16% in three years, versus a market return of about 12%. But it's up 5.2% in the last week.

While the last three years has been tough for National Bank Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for National Bank Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Although the share price is down over three years, National Bank Holdings actually managed to grow EPS by 9.4% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that, in three years, revenue has actually grown at a 8.2% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating National Bank Holdings further; while we may be missing something on this analysis, there might also be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that National Bank Holdings has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think National Bank Holdings will earn in the future (free profit forecasts).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 National Bank Holdings the TSR over the last 3 years was -9.6%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

National Bank Holdings provided a TSR of 13% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 0.1% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand National Bank Holdings better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for National Bank Holdings you should know about.

Of course National Bank Holdings 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.