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The main point of investing for the long term is to make money. Better yet, you’d like to see the share price move up more than the market average. Unfortunately for shareholders, while the Popular, Inc. (NASDAQ:BPOP) share price is up 51% in the last five years, that’s less than the market return. Over the last twelve months the stock price has risen a very respectable 14%.
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
Check out our latest analysis for Popular
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 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, Popular managed to grow its earnings per share at 3.7% a year. This EPS growth is lower than the 9% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. And that’s hardly shocking given the track record of 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.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Popular’s TSR for the last 5 years was 77%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
Popular shareholders gained a total return of 17% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Popular you should know about.
