Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) shareholders will doubtless be very grateful to see the share price up 31% in the last quarter. But that is minimal compensation for the share price under-performance over the last year. In fact, the price has declined 14% in a year, falling short of the returns you could get by investing in an index fund.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unfortunately Bank of the James Financial Group reported an EPS drop of 13% for the last year. This proportional reduction in earnings per share isn't far from the 14% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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. Dive deeper into the earnings by checking this interactive graph of Bank of the James Financial Group's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Bank of the James Financial Group the TSR over the last year was -12%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Bank of the James Financial Group had a tough year, with a total loss of 12% (including dividends), against a market gain of about 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. 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. It's always interesting to track share price performance over the longer term. But to understand Bank of the James Financial Group better, we need to consider many other factors. Even so, be aware that Bank of the James Financial Group is showing 3 warning signs in our investment analysis , you should know about...
Bank of the James Financial Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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 decide to trade Bank of the James Financial Group, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.