When you buy shares in a company, it’s worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of First Citizens BancShares, Inc. (NASDAQ:FCNC.A) stock is up an impressive 293% over the last five years. The last week saw the share price soften some 3.0%.
Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.
See our latest analysis for First Citizens BancShares
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).
Over half a decade, First Citizens BancShares managed to grow its earnings per share at 36% a year. So the EPS growth rate is rather close to the annualized share price gain of 31% per year. That suggests that the market sentiment around the company hasn’t changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how First Citizens BancShares has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at First Citizens BancShares’ financial health with this free report on its balance sheet.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of First Citizens BancShares, it has a TSR of 299% for the last 5 years. 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!
We’re pleased to report that First Citizens BancShares shareholders have received a total shareholder return of 50% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 32% per year), it would seem that the stock’s performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It’s always interesting to track share price performance over the longer term. But to understand First Citizens BancShares better, we need to consider many other factors. Even so, be aware that First Citizens BancShares is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant…
