Should Chemung Financial (NASDAQ:CHMG) Be Disappointed With Their 51% Profit?

The simplest way to invest in stocks is to buy exchange traded funds. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Chemung Financial Corporation (NASDAQ:CHMG) share price is 51% higher than it was five years ago, which is more than the market average. The 0.8% share price rise over the last year is decent, but not great.

See our latest analysis for Chemung Financial

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.

During five years of share price growth, Chemung Financial achieved compound earnings per share (EPS) growth of 26% per year. The EPS growth is more impressive than the yearly share price gain of 8.6% over the same period. So it seems the market isn’t so enthusiastic about the stock these days.

You can see below how EPS has changed over time.

NasdaqGS:CHMG Past and Future Earnings, October 23rd 2019
NasdaqGS:CHMG Past and Future Earnings, October 23rd 2019

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 Chemung Financial’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Chemung Financial, it has a TSR of 75% for the last 5 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

Chemung Financial provided a TSR of 3.2% over the last twelve months. But that was short of the market average. It’s probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 12% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Chemung Financial by clicking this link.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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.

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. Thank you for reading.