Can You Imagine How Chuffed Medallion Financial’s (NASDAQ:MFIN) Shareholders Feel About Its 206% Share Price Gain?

The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For instance the Medallion Financial Corp. (NASDAQ:MFIN) share price is 206% higher than it was three years ago. How nice for those who held the stock! Better yet, the share price has risen 5.7% in the last week.

See our latest analysis for Medallion Financial

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

During three years of share price growth, Medallion Financial moved from a loss to profitability. Given the importance of this milestone, it’s not overly surprising that the share price has increased strongly.

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

NasdaqGS:MFIN Past and Future Earnings, January 31st 2020
NasdaqGS:MFIN Past and Future Earnings, January 31st 2020

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Medallion Financial’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We’ve already covered Medallion Financial’s share price action, but we should also mention its 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. Medallion Financial’s TSR of 206% for the 3 years exceeded its share price return, because it has paid dividends.

A Different Perspective

It’s good to see that Medallion Financial has rewarded shareholders with a total shareholder return of 32% in the last twelve months. There’s no doubt those recent returns are much better than the TSR loss of 3.0% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It’s always interesting to track share price performance over the longer term. But to understand Medallion Financial better, we need to consider many other factors. For example, we’ve discovered 1 warning sign for Medallion Financial that you should be aware of before investing here.

Medallion Financial is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.