Stock Analysis

Mid Penn Bancorp (NASDAQ:MPB) sheds 13% this week, as yearly returns fall more in line with earnings growth

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Mid Penn Bancorp, Inc. (NASDAQ:MPB) shareholders might be concerned after seeing the share price drop 19% in the last quarter. But at least the stock is up over the last three years. However, it's unlikely many shareholders are elated with the share price gain of 58% over that time, given the rising market.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Mid Penn Bancorp

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Mid Penn Bancorp achieved compound earnings per share growth of 18% per year. We note that the 17% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This suggests that sentiment and expectations have not changed drastically. 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).

NasdaqGM:MPB Earnings Per Share Growth March 14th 2023

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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. As it happens, Mid Penn Bancorp's TSR for the last 3 years was 74%, 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 it's certainly disappointing to see that Mid Penn Bancorp shares lost 0.6% throughout the year, that wasn't as bad as the market loss of 7.3%. What is more upsetting is the 0.7% per annum loss investors have suffered over the last half decade. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Mid Penn Bancorp is showing 1 warning sign in our investment analysis , you should know about...

Mid Penn Bancorp 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.

What are the risks and opportunities for Mid Penn Bancorp?

Mid Penn Bancorp, Inc. operates as the bank holding company for Mid Penn Bank that engages in the provision of commercial banking services to individuals, partnerships, non-profit organizations, and corporations.

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  • Trading at 43.6% below our estimate of its fair value

  • Earnings are forecast to grow 14.03% per year

  • Earnings grew by 86.9% over the past year


No risks detected for MPB from our risks checks.

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