In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Union Bankshares, Inc. (NASDAQ:UNB), since the last five years saw the share price fall 54%. And we doubt long term believers are the only worried holders, since the stock price has declined 26% over the last twelve months. Even worse, it’s down 16% in about a month, which isn’t fun at all. However, we note the price may have been impacted by the broader market, which is down 11% in the same time period.
Since Union Bankshares has shed US$11m from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.
Though if you’re not interested in researching what drove UNB’s performance, we have a free list of interesting investing ideas to potentially inspire your next investment!
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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, Union Bankshares actually managed to increase EPS by an average of 7.6% 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.
The steady dividend doesn’t really explain why the share price is down. It’s not immediately clear to us why the stock price is down but further research might provide some answers.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Union Bankshares’ financial health with this free report on its balance sheet.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Union Bankshares the TSR over the last 5 years was -44%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Union Bankshares shareholders are down 23% over twelve months (even including dividends), which isn’t far from the market return of -22%. Unfortunately, last year’s performance is a deterioration of an already poor long term track record, given the loss of 8% per year over the last five years. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. It’s always interesting to track share price performance over the longer term. But to understand Union Bankshares better, we need to consider many other factors. Even so, be aware that Union Bankshares is showing 1 warning sign in our investment analysis , you should know about…
But note: Union Bankshares may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
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