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If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the First Community Corporation (NASDAQ:FCCO) share price is up 43% in the last five years, that's less than the market return. On a brighter note, more newer shareholders are probably rather content with the 32% share price gain over twelve months.
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 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 five years of share price growth, First Community achieved compound earnings per share (EPS) growth of 10% per year. This EPS growth is higher than the 7% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that First Community has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. We note that for First Community the TSR over the last 5 years was 60%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
First Community shareholders gained a total return of 36% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 10% over half a decade This suggests the company might be improving over time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course First Community 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.
This article by Simply Wall St is general in nature. 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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