Optimism for Bank of N.T. Butterfield & Son (NYSE:NTB) has grown this past week, despite one-year decline in earnings

If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) share price is up 28% in the last 1 year, clearly besting the market return of around 21% (not including dividends). So that should have shareholders smiling. Zooming out, the stock is actually down 1.7% in the last three years.

Since it's been a strong week for Bank of N.T. Butterfield & Son shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Bank of N.T. Butterfield & Son

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 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.

Over the last twelve months, Bank of N.T. Butterfield & Son actually shrank its EPS by 3.3%.

Sometimes companies will sacrifice EPS in the short term for longer term gains; and in that case we may be able to find other positives. It makes sense to check some of the other fundamental data for an explanation of the share price rise.

We haven't seen Bank of N.T. Butterfield & Son increase dividend payments yet, so the yield probably hasn't helped drive the share higher. We don't find the recent revenue growth particularly impressive at a glance, but shareholders could be projecting an uptick.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Bank of N.T. Butterfield & Son's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Bank of N.T. Butterfield & Son, it has a TSR of 36% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Bank of N.T. Butterfield & Son shareholders have received a total shareholder return of 36% over the last year. Of course, that includes the dividend. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Bank of N.T. Butterfield & Son (1 shouldn't be ignored) that you should be aware of.

For those who like to find winning investments this free list of undervalued 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 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com