You can invest in an index fund if you want to make sure your returns approximately match the overall market. But in any given year a good portion of stocks will fall short of that. For example, that's what happened with FB Financial Corporation (NYSE:FBK) over the last year - it's share price is down 11% versus a market decline of 9.0%. Longer term investors have fared much better, since the share price is up 9.1% in three years. It's down 14% in about a quarter. However, one could argue that the price has been influenced by the general market, which is down 11% in the same timeframe.
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.
See our latest analysis for FB Financial
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).
During the unfortunate twelve months during which the FB Financial share price fell, it actually saw its earnings per share (EPS) improve by 31%. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
With a low yield of 1.4% we doubt that the dividend influences the share price much. FB Financial managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
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. If you are thinking of buying or selling FB Financial stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
The total return of 9.8% received by FB Financial shareholders over the last year isn't far from the market return of -9.0%. Longer term investors wouldn't be so upset, since they would have made 1.0%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. If you would like to research FB Financial in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: FB Financial may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.