FB Financial Corporation (NYSE:FBK) investors may be worried after observing a 13% drop in share price over the last quarter. However, the good news is that the stock has risen over the past five years. During this period, it has increased by 48%, which, while respectable, still trails behind the market return of 107%.
Even though FB Financial has seen a decline of US$123 million in market capitalization this week, it’s worthwhile to examine its long-term fundamental trends to understand their impact on returns.
Discover our latest insights for FB Financial
To rephrase Benjamin Graham: The market acts as a voting machine in the short run, but as a weighing machine in the long run. By analyzing the changes in earnings per share (EPS) and share price over time, we can gauge how investor perceptions toward a company have evolved.
FB Financial’s earnings per share have decreased by 1.6% annually, despite robust share price performance over five years.
Thus, it’s difficult to claim that earnings per share is the most accurate metric for evaluating the company, as profits may not be its current focus. Since the EPS change does not appear to correlate with share price changes, exploring other metrics is advisable.
The modest 1.5% dividend yield is unlikely to be a significant factor in supporting the share price. Additionally, the revenue growth of 1.8% annually is hardly impressive. So what accounts for the rising share price? The answer isn’t immediately clear, but a deeper investigation into the company’s progress over time could provide some insights.
The graphic below illustrates the evolution of earnings and revenue over time (click the image to reveal the specific figures).
It’s encouraging to note significant insider buying in the past three months. This is a positive sign. Nonetheless, we believe that trends in earnings and revenue growth are even more crucial to consider. Therefore, it makes a lot of sense to explore what analysts predict for FB Financial’s future earnings (free profit forecasts).
When evaluating investment returns, it’s essential to differentiate between total shareholder return (TSR) and share price return. TSR accounts for the value of any spin-offs or capital raises, along with dividends reinvested. Arguably, TSR offers a more comprehensive view of the return generated by a stock. For FB Financial, the TSR over the last 5 years was 59%, which outperforms the share price return mentioned earlier. It’s clear that dividend payments have played a significant role in this divergence!
