It is a pleasure to report that the Bank of Hawaii Corporation (NYSE:BOH) is up 35% in the last quarter. But in truth the last year hasn’t been good for the share price. The cold reality is that the stock has dropped 17% in one year, under-performing the market.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Unhappily, Bank of Hawaii had to report a 22% decline in EPS over the last year. The share price fall of 17% isn’t as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.
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. Dive deeper into the earnings by checking this interactive graph of Bank of Hawaii’s earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Bank of Hawaii, it has a TSR of -14% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Bank of Hawaii had a tough year, with a total loss of 14% (including dividends), against a market gain of about 22%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Bank of Hawaii better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Bank of Hawaii .
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.