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Cathay General Bancorp's (NASDAQ:CATY) three-year total shareholder returns outpace the underlying earnings growth

Simply Wall St ·  {{timeTz}}

It hasn't been the best quarter for Cathay General Bancorp (NASDAQ:CATY) shareholders, since the share price has fallen 16% in that time. But at least the stock is up over the last three years. However, it's unlikely many shareholders are elated with the share price gain of 14% over that time, given the rising market.

Since the long term performance has been good but there's been a recent pullback of 7.2%, let's check if the fundamentals match the share price.

Check out our latest analysis for Cathay General Bancorp

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Cathay General Bancorp was able to grow its EPS at 5.6% per year over three years, sending the share price higher. This EPS growth is higher than the 4% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.81.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NasdaqGS:CATY Earnings Per Share Growth June 16th 2022

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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 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 Cathay General Bancorp, it has a TSR of 27% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While it's never nice to take a loss, Cathay General Bancorp shareholders can take comfort that , including dividends,their trailing twelve month loss of 3.2% wasn't as bad as the market loss of around 18%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 4% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. Before spending more time on Cathay General Bancorp it might be wise to click here to see if insiders have been buying or selling shares.

But note: Cathay General Bancorp 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.

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.

This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal.


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