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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Horizon Bancorp, Inc. (NASDAQ:HBNC) share price is up 14% in the last 1 year, clearly besting the market decline of around 13% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! The longer term returns are positive, with the share price up 13% in 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 Horizon Bancorp
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 the last year Horizon Bancorp grew its earnings per share (EPS) by 10%. The share price gain of 14% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Horizon Bancorp's TSR for the last 1 year was 18%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Horizon Bancorp has rewarded shareholders with a total shareholder return of 18% in the last twelve months. That's including the dividend. That's better than the annualised return of 5% 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. Keeping this in mind, a solid next step might be to take a look at Horizon Bancorp's dividend track record. This free interactive graph is a great place to start.