The one-year shareholder returns and company earnings persist lower as Prosperity Bancshares (NYSE:PB) stock falls a further 3.2% in past week

By
Simply Wall St
Published
April 13, 2022
NYSE:PB
Source: Shutterstock

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Prosperity Bancshares, Inc. (NYSE:PB) share price slid 11% over twelve months. That falls noticeably short of the market decline of around 0.5%. Looking at the longer term, the stock is down 8.9% over three years. The share price has dropped 16% in three months. However, one could argue that the price has been influenced by the general market, which is down 8.7% in the same timeframe.

If the past week is anything to go by, investor sentiment for Prosperity Bancshares isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Prosperity Bancshares

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 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.

Unfortunately Prosperity Bancshares reported an EPS drop of 1.4% for the last year. The share price decline of 11% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 11.72 also points to the negative market sentiment.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
NYSE:PB Earnings Per Share Growth April 13th 2022

Dive deeper into Prosperity Bancshares' key metrics by checking this interactive graph of Prosperity Bancshares's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Prosperity Bancshares' TSR for the last 1 year was -8.3%, 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

We regret to report that Prosperity Bancshares shareholders are down 8.3% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 0.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on Prosperity Bancshares it might be wise to click here to see if insiders have been buying or selling shares.

Of course Prosperity Bancshares 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 US exchanges.

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