For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term West Bancorporation, Inc. (NASDAQ:WTBA) shareholders have had that experience, with the share price dropping 41% in three years, versus a market return of about 26%. More recently, the share price has dropped a further 8.4% in a month.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

See our latest analysis for West Bancorporation

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the three years that the share price fell, West Bancorporation's earnings per share (EPS) dropped by 20% each year. This fall in the EPS is worse than the 16% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on West Bancorporation's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for West Bancorporation the TSR over the last 3 years was -32%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

West Bancorporation shareholders gained a total return of 22% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 1.4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.