If you buy and hold a stock for many years, you’d hope to be making a profit. Better yet, you’d like to see the share price move up more than the market average. Unfortunately for shareholders, while the Bryn Mawr Bank Corporation (NASDAQ:BMTC) share price is up 38% in the last five years, that’s less than the market return. Zooming in, the stock is up a respectable 11% in the last year.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Over half a decade, Bryn Mawr Bank managed to grow its earnings per share at 8.1% a year. This EPS growth is higher than the 6.7% average annual increase in the share price. So it seems the market isn’t so enthusiastic about the stock these days.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Bryn Mawr Bank has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Bryn Mawr Bank’s balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Bryn Mawr Bank the TSR over the last 5 years was 56%, 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
Bryn Mawr Bank shareholders are up 14% for the year (even including dividends) . Unfortunately this falls short of the market return. On the bright side, that’s still a gain, and it’s actually better than the average return of 9.4% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 1 warning sign for Bryn Mawr Bank which any shareholder or potential investor should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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 email@example.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.
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