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Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But you can make better returns by buying undervalued shares. To wit, Southside Bancshares, Inc. (NASDAQ:SBSI) shares are up 62% in three years, besting the market return. Zooming in, the stock is up just 1.0% in the last year.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Southside Bancshares was able to grow its EPS at 9.6% per year over three years, sending the share price higher. In comparison, the 17% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It’s not unusual to see the market ‘re-rate’ a stock, after a few years of growth.
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. 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Southside Bancshares the TSR over the last 3 years was 79%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s good to see that Southside Bancshares has rewarded shareholders with a total shareholder return of 4.7% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 11% per year, is even more impressive. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. 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.
Southside Bancshares 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.
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 email@example.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.