The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. Unfortunately the Southside Bancshares, Inc. (NASDAQ:SBSI) share price slid 22% over twelve months. That’s well below the market decline of 3.2%. Taking the longer term view, the stock fell 20% over the last three years. The share price has dropped 23% in three months. However, one could argue that the price has been influenced by the general market, which is down 14% in the same timeframe.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the unfortunate twelve months during which the Southside Bancshares share price fell, it actually saw its earnings per share (EPS) improve by 4.1%. Of course, the situation might betray previous over-optimism about growth.
By glancing at these numbers, we’d posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.
We don’t see any weakness in the Southside Bancshares’s dividend so the steady payout can’t really explain the share price drop. The revenue trend doesn’t seem to explain why the share price is down. Of course, it could simply be that it simply fell short of the market consensus expectations.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Southside Bancshares will earn in the future (free profit forecasts).
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Southside Bancshares’s TSR for the last year was -19%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market lost about 3.2% in the twelve months, Southside Bancshares shareholders did even worse, losing 19% (even including dividends) . Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn’t be so upset, since they would have made 6.3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 3 warning signs for Southside Bancshares (1 is significant!) that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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 firstname.lastname@example.org. 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.