If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) share price is 20% higher than it was a year ago, much better than the market decline of around 6.0% (not including dividends) in the same period. So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 2.5% in the last three years.
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.
View our latest analysis for Peoples Bancorp of North Carolina
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.
Peoples Bancorp of North Carolina was able to grow EPS by 35% in the last twelve months. It's fair to say that the share price gain of 20% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Peoples Bancorp of North Carolina as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.41.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized 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 Peoples Bancorp of North Carolina's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Peoples Bancorp of North Carolina the TSR over the last 1 year was 24%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!