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We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. Over the last year the The First Bancorp, Inc. (NASDAQ:FNLC) share price is up 13%, but that's less than the broader market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 12% in three years.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
See our latest analysis for First Bancorp
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 24%.
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.
Absent any improvement, we don't think a thirst for dividends is pushing up the First Bancorp's share price. It saw it's revenue decline by 11% over twelve months. Usually that correlates with a lower share price, but let's face it, the gyrations of the market are sometimes only as clear as mud.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on First Bancorp's balance sheet strength is a great place to start, if you want to investigate the stock further.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for First Bancorp the TSR over the last 1 year was 20%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
First Bancorp shareholders gained a total return of 20% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 4% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. Before spending more time on First Bancorp it might be wise to click here to see if insiders have been buying or selling shares.