Yahoo Finance M&T Bank (NYSE:MTB) investors are sitting on a loss of 5.8% if they invested five years ago
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in M&T Bank Corporation (NYSE:MTB), since the last five years saw the share price fall 18%. In the last ninety days we've seen the share price slide 20%.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for M&T Bank
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate half decade during which the share price slipped, M&T Bank actually saw its earnings per share (EPS) improve by 1.1% 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 possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
Given that EPS has increased, but the share price has fallen, it's fair to say that market sentiment around the stock has become more negative. Generally speaking, though, if the company can keep growing EPS then the share price will eventually follow.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on M&T Bank's earnings, revenue and cash flow.
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. As it happens, M&T Bank's TSR for the last 5 years was -5.8%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's certainly disappointing to see that M&T Bank shares lost 15% throughout the year, that wasn't as bad as the market loss of 20%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 1.1% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. It's always interesting to track share price performance over the longer term. But to understand M&T Bank better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with M&T Bank , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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.
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