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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 National Bank Holdings Corporation (NYSE:NBHC) has fallen short of that second goal, with a share price rise of 21% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 18%.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
See our latest analysis for National Bank Holdings
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.
Over half a decade, National Bank Holdings managed to grow its earnings per share at 15% a year. This EPS growth is higher than the 4% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
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. This free interactive report on National Bank Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for National Bank Holdings the TSR over the last 5 years was 33%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that National Bank Holdings shareholders have received a total shareholder return of 21% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research National Bank Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.