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Passive investing in index funds can generate returns that roughly match the overall market. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the South Plains Financial, Inc. (NASDAQ:SPFI) share price is 76% higher than it was five years ago, which is more than the market average. It's fair to say the stock has continued its long term trend in the last year, over which it has risen 41%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for South Plains Financial
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, South Plains Financial achieved compound earnings per share (EPS) growth of 12% per year. That makes the EPS growth particularly close to the yearly share price growth of 12%. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of South Plains Financial's earnings, revenue and cash flow.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, South Plains Financial's TSR for the last 5 years was 91%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that South Plains Financial has rewarded shareholders with a total shareholder return of 44% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.