Would Shareholders Who Purchased OceanFirst Financial's (NASDAQ:OCFC) Stock Three Years Be Happy With The Share price Today?

As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term OceanFirst Financial Corp. (NASDAQ:OCFC) shareholders, since the share price is down 40% in the last three years, falling well short of the market return of around 46%. And over the last year the share price fell 34%, so we doubt many shareholders are delighted. There was little comfort for shareholders in the last week as the price declined a further 5.1%.

View our latest analysis for OceanFirst Financial

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the three years that the share price fell, OceanFirst Financial's earnings per share (EPS) dropped by 9.8% each year. The share price decline of 16% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of OceanFirst Financial'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 or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, OceanFirst Financial's TSR for the last 3 years was -35%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in OceanFirst Financial had a tough year, with a total loss of 31% (including dividends), against a market gain of about 22%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - OceanFirst Financial has 3 warning signs we think you should be aware of.

OceanFirst Financial 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.

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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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