One way to deal with stock volatility is to ensure you have a properly diverse portfolio. Of course, in an ideal world, all your stocks would beat the market. One such company is First Bancorp (NASDAQ:FBNC), which saw its share price increase 27% in the last year, slightly above the market return of around 25% (not including dividends). However, the longer term returns haven’t been so impressive, with the stock up just 1.9% in the last three years.
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 Bancorp
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 last year, First Bancorp actually saw its earnings per share drop 13%.
This means it’s unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
First Bancorp’s revenue actually dropped 5.8% over last year. So the fundamental metrics don’t provide an obvious explanation for the share price gain.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. You can see what analysts are predicting for First Bancorp in this interactive graph of future profit estimates.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of First Bancorp, it has a TSR of 30% 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!
We’re pleased to report that First Bancorp shareholders have received a total shareholder return of 30% over one year. Of course, that includes the dividend. That’s better than the annualised return of 6% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It’s always interesting to track share price performance over the longer term. But to understand First Bancorp better, we need to consider many other factors. For example, we’ve discovered 1 warning sign for First Bancorp that you should be aware of before investing here.
