The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the West Bancorporation, Inc. (NASDAQ:WTBA) share price is up 75% in the last 1 year, clearly besting the market return of around 37% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! The longer term returns have not been as good, with the stock price only 26% higher than it was three years ago.
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 West Bancorporation
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).
West Bancorporation was able to grow EPS by 33% in the last twelve months. This EPS growth is significantly lower than the 75% increase in the share price. This indicates that the market is now more optimistic about the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on West Bancorporation's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for West Bancorporation the TSR over the last 1 year was 82%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that West Bancorporation has rewarded shareholders with a total shareholder return of 82% in the last twelve months. That's including the dividend. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand West Bancorporation better, we need to consider many other factors. For example, we've discovered 1 warning sign for West Bancorporation that you should be aware of before investing here.
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.
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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