Did Meridian's (NASDAQ:MRBK) Share Price Deserve to Gain 91%?

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Meridian Corporation (NASDAQ:MRBK) share price is up 91% in the last year, clearly besting the market return of around 74% (not including dividends). So that should have shareholders smiling. Also impressive, the stock is up 48% over three years, making long term shareholders happy, too.

Check out our latest analysis for Meridian

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...' 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).

Meridian was able to grow EPS by 164% in the last twelve months. It's fair to say that the share price gain of 91% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Meridian as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 6.00.

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. Dive deeper into the earnings by checking this interactive graph of Meridian'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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Meridian, it has a TSR of 102% for the last year. 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

It's nice to see that Meridian shareholders have gained 102% (in total) over the last year. And yes, that does include the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 16%. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 3 warning signs for Meridian (1 shouldn't be ignored) that you should be aware of.

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 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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