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For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Western New England Bancorp, Inc. (NASDAQ:WNEB), since the last five years saw the share price fall 44%. And we doubt long term believers are the only worried holders, since the stock price has declined 26% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 36% in the last 90 days.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Western New England Bancorp
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
While the share price declined over five years, Western New England Bancorp actually managed to increase EPS by an average of 26% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.
We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It's not immediately clear to us why the stock price is down but further research might provide some answers.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Western New England Bancorp has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Western New England 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Western New England Bancorp, it has a TSR of -36% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.