Yahoo Finance Charles Schwab's (NYSE:SCHW) three-year earnings growth trails the 16% YoY shareholder returns
The Charles Schwab Corporation (NYSE:SCHW) shareholders might understandably be very concerned that the share price has dropped 38% in the last quarter. But over three years, the returns would have left most investors smiling After all, the share price is up a market-beating 52% in that time.
Since it's been a strong week for Charles Schwab shareholders, let's have a look at trend of the longer term fundamentals.
Check out our latest analysis for Charles Schwab
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Charles Schwab was able to grow its EPS at 14% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 15% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. 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).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Charles Schwab's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Charles Schwab's TSR for the last 3 years was 58%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 0.8% in the last year, Charles Schwab shareholders lost 22% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Charles Schwab is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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