It is a pleasure to report that the Live Oak Bancshares, Inc. (NASDAQ:LOB) is up 44% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 15% in the last three years, falling well short of the market return.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, Live Oak Bancshares’ earnings per share (EPS) dropped by 38% each year. This fall in the EPS is worse than the 5.3% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 110.12, it’s fair to say the market sees a brighter future for the business.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Live Oak Bancshares’ 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’d be remiss not to mention the difference between Live Oak Bancshares’ total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Live Oak Bancshares shareholders, and that cash payout explains why its total shareholder loss of 14%, over the last 3 years, isn’t as bad as the share price return.
A Different Perspective
Live Oak Bancshares provided a TSR of 4.6% over the last twelve months. But that was short of the market average. But at least that’s still a gain! Over five years the TSR has been a reduction of 0.3% per year, over five years. It could well be that the business is stabilizing. It’s always interesting to track share price performance over the longer term. But to understand Live Oak Bancshares better, we need to consider many other factors. For example, we’ve discovered 3 warning signs for Live Oak Bancshares (1 doesn’t sit too well with us!) that you should be aware of before investing here.
Live Oak Bancshares is not the only stock that insiders are buying. 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.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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