Did BMTC Group's Share Price Deserve to Gain 16%?

Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!

Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the BMTC Group Inc. (TSE:GBT) share price is up 16% in the last three years, that falls short of the market return. Zooming in, the stock is actually down 5.2% in the last year.

Check out our latest analysis for BMTC Group

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. 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).

BMTC Group was able to grow its EPS at 5.2% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 5.0% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Au contraire, the share price change has arguably mimicked the EPS growth.

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 freereport on BMTC Group's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of BMTC Group, it has a TSR of 22% for the last 3 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

While the broader market gained around 3.4% in the last year, BMTC Group shareholders lost 3.3% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 2.2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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.

BMTC Group is not the only stock insiders are buying. So take a peek at this freelist of growing companies with insider buying.

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.