For many, the main point of investing in the stock market is to achieve spectacular returns. When you buy and hold the right company, the returns can make a huge difference to both you and your family. For example, the Silvergate Capital Corporation (NYSE:SI) share price is up a whopping 795% in the last 1 year, a handsome return in a single year. Also pleasing for shareholders was the 60% gain in the last three months. We'll need to follow Silvergate Capital for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long. Anyone who held for that rewarding ride would probably be keen to talk about it.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Silvergate Capital
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Silvergate Capital grew its earnings per share (EPS) by 113%. This EPS growth is significantly lower than the 795% increase in the share price. This indicates that the market is now more optimistic about the stock. The fairly generous P/E ratio of 84.20 also points to this optimism.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Silvergate Capital's earnings, revenue and cash flow.
A Different Perspective
Silvergate Capital shareholders should be happy with the total gain of 795% over the last twelve months. That's better than the more recent three month gain of 60%, implying that share price has plateaued recently. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). It's always interesting to track share price performance over the longer term. But to understand Silvergate Capital better, we need to consider many other factors. Take risks, for example - Silvergate Capital has 3 warning signs we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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