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Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the National Bank Holdings Corporation (NYSE:NBHC) share price is up 47% in the last 1 year, clearly besting the market return of around 37% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 3.8% in three years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for National Bank Holdings
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
National Bank Holdings was able to grow EPS by 14% in the last twelve months. This EPS growth is significantly lower than the 47% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that National Bank Holdings 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?
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. 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 1 year was 51%, 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
It's good to see that National Bank Holdings has rewarded shareholders with a total shareholder return of 51% in the last twelve months. Of course, that includes 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. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - National Bank Holdings has 1 warning sign we think you should be aware of.