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It's always best to build a diverse portfolio of shares, since any stock business could lag the broader market. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is Enterprise Financial Services Corp (NASDAQ:EFSC), which saw its share price increase 25% in the last year, slightly above the market return of around 24% (not including dividends). However, the stock hasn't done so well in the longer term, with the stock only up 19% in three years.
Although Enterprise Financial Services has shed US$177m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Check out our latest analysis for Enterprise Financial Services
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the last twelve months, Enterprise Financial Services actually shrank its EPS by 14%.
This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Enterprise Financial Services stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Enterprise Financial Services the TSR over the last 1 year was 28%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Enterprise Financial Services' TSR for the year was broadly in line with the market average, at 28%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 5% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Enterprise Financial Services better, we need to consider many other factors. For example, we've discovered 1 warning sign for Enterprise Financial Services that you should be aware of before investing here.