Would Shareholders Who Purchased Bank of N.T. Butterfield & Son's (NYSE:NTB) Stock Three Years Be Happy With The Share price Today?

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) shareholders, since the share price is down 28% in the last three years, falling well short of the market return of around 63%.

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

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the unfortunate three years of share price decline, Bank of N.T. Butterfield & Son actually saw its earnings per share (EPS) improve by 1.0% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.

It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. However, taking a look at other business metrics might shed a bit more light on the share price action.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. Revenue has been pretty flat over three years, so that isn't an obvious reason shareholders would sell. So it might be worth looking at how revenue growth over time, in greater detail.

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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Bank of N.T. Butterfield & Son, it has a TSR of -17% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Over the last year Bank of N.T. Butterfield & Son shareholders have received a TSR of 3.2%. While you don't go broke making a profit, this return was actually lower than the average market return of about 30%. On the bright side, that's certainly better than the yearly loss of about 5% endured over the last three years, implying that the company is doing better recently. We hope the turnaround in fortunes continues. It's always interesting to track share price performance over the longer term. But to understand Bank of N.T. Butterfield & Son better, we need to consider many other factors. Even so, be aware that Bank of N.T. Butterfield & Son is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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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. 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.
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