International Bancshares' (NASDAQ:IBOC) investors will be pleased with their stellar 209% return over the last five years
International Bancshares (NASDAQ:IBOC) has delivered a remarkable 209% total shareholder return (TSR) over the past five years, significantly outperforming its share price growth of 172%. The company's earnings per share (EPS) grew at an annual rate of 19%, closely aligning with the 22% average annual increase in share price. Despite a recent 1.2% decline in stock price, shareholders have seen a 16% return this year, indicating a solid long-term performance with a 25% annual TSR over five years. Investors are advised to consider other factors before investing, including a warning sign identified for the company.
When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of International Bancshares Corporation (NASDAQ:IBOC) stock is up an impressive 172% over the last five years. It's down 1.2% in the last seven days.
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.
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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During five years of share price growth, International Bancshares achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is reasonably close to the 22% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, International Bancshares' TSR for the last 5 years was 209%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
International Bancshares shareholders are up 16% for the year (even including dividends). But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 25% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand International Bancshares better, we need to consider many other factors. For example, we've discovered 1 warning sign for International Bancshares that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
