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The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Central Valley Community Bancorp (NASDAQ:CVCY) share price is 42% higher than it was a year ago, much better than the market return of around 14% (not including dividends) in the same period. That's a solid performance by our standards! Having said that, the longer term returns aren't so impressive, with stock gaining just 19% in three years.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last year Central Valley Community Bancorp grew its earnings per share (EPS) by 66%. It's fair to say that the share price gain of 42% did not keep pace with the EPS growth. So it seems like the market has cooled on Central Valley Community Bancorp, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.64.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Central Valley Community Bancorp has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Central Valley Community Bancorp will grow revenue in the future.
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 Central Valley Community Bancorp, it has a TSR of 46% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that Central Valley Community Bancorp has rewarded shareholders with a total shareholder return of 46% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Central Valley Community Bancorp (of which 1 is a bit concerning!) you should know about.
For those who like to find winning investments this free list of growing 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 US 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.