Investing isn't easy. Even Warren Buffett counsels that most investors should invest in a low-cost index like the S&P 500. That way, "you'll be buying into a wonderful industry, which in effect is all of American industry," he says.
But there are, of course, companies whose long-term fortunes differ substantially from the index. In this series, we look at how individual stocks have performed against the broad S&P 500.
Step on up, 1st Source (NASDAQ:SRCE).
1st Source shares have easily outperformed the S&P 500 over the last quarter-century:
Since 1987, shares have returned an average of 11.2% a year, compared with 9.7% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1987 would be worth $19,200 today. In 1st Source, it'd be worth $29,700.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 43% of 1st Source's total returns. For the S&P, dividends account for 39% of total returns.
Now have a look at how 1st Source earnings compare with S&P 500 earnings:
A little underperformance here. Since 1995, 1st Source's earnings per share have increased by an average of 5% a year, compared with 6% a year for the broader index.
What's that meant for valuations? 1st Source has traded for an average of 19 times earnings since 1987 -- below the 24 times earnings for the broader S&P 500. It's different today, however. 1st Source shares current trade for around 11 times earnings.
Through it all, shares have been strong performers over the last quarter-century.
Of course, the important question is whether or not that will continue. That's where you come in. Our CAPS community currently ranks 1st Source with a one-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add 1st Source to My Watchlist.
Motley Fool Staff has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.