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Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Northeast Community Bancorp, Inc. (NASDAQ:NECB) shares for the last five years, while they gained 315%. And this is just one example of the epic gains achieved by some long term investors. It's also up 12% in about a month. But the price may well have benefitted from a buoyant market, since stocks have gained 6.4% in the last thirty days.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
We check all companies for important risks. See what we found for Northeast Community Bancorp in our free report.
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, Northeast Community Bancorp managed to grow its earnings per share at 38% a year. This EPS growth is reasonably close to the 33% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Northeast Community Bancorp's TSR for the last 5 years was 367%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Northeast Community Bancorp shareholders have received a total shareholder return of 40% over the last year. That's including the dividend. That's better than the annualised return of 36% 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. Before spending more time on Northeast Community Bancorp it might be wise to click here to see if insiders have been buying or selling shares.