While it may not be enough for some shareholders, we think it is good to see the Genworth Mortgage Insurance Australia Limited (ASX:GMA) share price up 14% in a single quarter. But that doesn’t help the fact that the three year return is less impressive. Truth be told the share price declined 16% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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, Genworth Mortgage Insurance Australia’s earnings per share (EPS) dropped by 26% each year. This fall in the EPS is worse than the 5.7% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment — or it may have previously priced some of the drop in.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
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. It might be well worthwhile taking a look at our free report on Genworth Mortgage Insurance Australia’s earnings, revenue and cash flow.
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. We note that for Genworth Mortgage Insurance Australia the TSR over the last 3 years was 34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Genworth Mortgage Insurance Australia shareholders have gained 12% over twelve months (even including dividends). This isn’t far from the market return of 11%. Most would be happy with a gain, and it helps that the year’s return is actually better than the average return of 10% over the last three years, implying that the company is doing better recently. We’re certainly happy to see the uptick and we hope the underlying business goes on to justify the improved valuation. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
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 AU 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 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. Thank you for reading.