Those who invested in First Business Financial Services (NASDAQ:FBIZ) five years ago are up 81%

The easiest way to invest in stocks is to buy exchange-traded funds. But the truth is that you can make big gains if you buy good quality companies at the right price. For example, the First Business Financial Services, Inc. (NASDAQ: FBIZ) the stock price is 58% higher than it was five years ago, which is above the market average. We are also pleased to report that the stock has increased by 22% over the past year.

With that in mind, it’s worth looking at whether the company’s underlying fundamentals have been driving long-term performance, or if there are any gaps.

See our latest analysis for First Business Financial Services

While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. An imperfect but simple way to examine the evolution of a company’s perception by the market is to compare the evolution of earnings per share (EPS) with the evolution of the share price.

In half a decade, First Business Financial Services has managed to increase its earnings per share by 26% per year. The EPS growth is more impressive than the 10% annual share price gain over the same period. So it seems that the market is not so enthusiastic about the title these days. The reasonably low P/E ratio of 7.83 also suggests market apprehension.

The company’s earnings per share (over time) is shown in the image below (click to see exact numbers).

earnings per share growth

It is good to see that there has been significant insider buying over the past three months. This is a positive point. On the other hand, we believe revenue and earnings trends are much more meaningful measures of the business. Dive deeper into earnings with this interactive earnings, revenue, and cash flow chart from First Business Financial Services.

What about dividends?

It is important to consider the total shareholder return, as well as the stock price return, for a given stock. The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, assuming the dividends are reinvested. It can be said that the TSR gives a more complete picture of the return generated by a stock. Note that for First Business Financial Services the TSR over the last 5 years was 81%, which is better than the share price return mentioned above. The dividends paid by the company thus inflated the total return to shareholders.

A different perspective

It’s good to see that First Business Financial Services shareholders have received a total shareholder return of 25% over the past year. Of course, this includes the dividend. As the one-year TSR is better than the five-year TSR (the latter standing at 13% per year), it seems that the stock’s performance has improved lately. Someone with an optimistic outlook might see the recent improvement in TSR as indicating that the company itself is improving over time. It is always interesting to follow the evolution of the share price over the long term. But to better understand First Business Financial Services, we need to consider many other factors. Take risks, for example – First Business Financial Services has 1 warning sign we think you should know.

If you like buying stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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