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The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But Commerce Bancshares, Inc. (NASDAQ:CBSH) has fallen short of that second goal, with a share price rise of 59% over five years, which is below the market return. On a brighter note, more newer shareholders are probably rather content with the 28% share price gain over twelve months.
The past week has proven to be lucrative for Commerce Bancshares investors, so let's see if fundamentals drove the company's five-year performance.
View our latest analysis for Commerce Bancshares
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Commerce Bancshares achieved compound earnings per share (EPS) growth of 6.7% per year. This EPS growth is lower than the 10% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Commerce Bancshares has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Commerce Bancshares the TSR over the last 5 years was 73%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Commerce Bancshares shareholders have received a total shareholder return of 31% over the last year. Of course, that includes the dividend. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Commerce Bancshares is showing 1 warning sign in our investment analysis , you should know about...