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East West Bancorp (NASDAQ:EWBC) Shareholders Have Enjoyed A 21% Share Price Gain

It hasn't been the best quarter for East West Bancorp, Inc. (NASDAQ:EWBC) shareholders, since the share price has fallen 11% in that time. On the bright side the share price is up over the last half decade. Unfortunately its return of 21% is below the market return of 62%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 18% decline over the last twelve months.

View our latest analysis for East West Bancorp

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

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During five years of share price growth, East West Bancorp achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is higher than the 3.9% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.52.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

NasdaqGS:EWBC Past and Future Earnings, October 23rd 2019
NasdaqGS:EWBC Past and Future Earnings, October 23rd 2019

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of East West Bancorp, it has a TSR of 32% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 11% in the last year, East West Bancorp shareholders lost 16% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5.8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of East West Bancorp by clicking this link.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.