Those who invested in Summit State Bank (NASDAQ:SSBI) three years ago are up 67%
Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But you can make better returns by buying undervalued shares. To wit, Summit State Bank (NASDAQ:SSBI) shares are up 50% in three years, besting the market return. More recently the stock has gained 5.2% in a year, which isn't too bad.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Summit State Bank
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Summit State Bank was able to grow its EPS at 36% per year over three years, sending the share price higher. The average annual share price increase of 15% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.12.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Summit State Bank's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Summit State Bank the TSR over the last 3 years was 67%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Summit State Bank has rewarded shareholders with a total shareholder return of 8.4% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 10% a year, is even better. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Summit State Bank by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
