Investors more bullish on First Bancorp (NASDAQ:FBNC) this week as stock rises 6.7%, despite earnings trending downwards over past year

Simply Wall St · 10/16 10:16

The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. For example, the First Bancorp (NASDAQ:FBNC) share price is up 53% in the last 1 year, clearly besting the market return of around 32% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Unfortunately the longer term returns are not so good, with the stock falling 6.4% in the last three years.

The past week has proven to be lucrative for First Bancorp investors, so let's see if fundamentals drove the company's one-year performance.

Check out our latest analysis for First Bancorp

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Over the last twelve months, First Bancorp actually shrank its EPS by 13%.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NasdaqGS:FBNC Earnings and Revenue Growth October 16th 2024

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think First Bancorp will earn in the future (free profit forecasts).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of First Bancorp, it has a TSR of 57% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that First Bancorp shareholders have received a total shareholder return of 57% over the last year. Of course, that includes the dividend. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand First Bancorp better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with First Bancorp , and understanding them should be part of your investment process.

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.