The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Berkshire Hills Bancorp, Inc. (NYSE:BHLB) shareholders over the last year, as the share price declined 25%. That’s disappointing when you consider the market returned 9.5%. Longer term investors have fared much better, since the share price is up 4.6% in three years.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Even though the Berkshire Hills Bancorp share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped. It’s fair to say that the share price does not seem to be reflecting the EPS growth. So it’s well worth checking out some other metrics, too.
Berkshire Hills Bancorp managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Berkshire Hills Bancorp stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Berkshire Hills Bancorp’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Berkshire Hills Bancorp shareholders, and that cash payout explains why its total shareholder loss of 23%, over the last year, isn’t as bad as the share price return.
A Different Perspective
Berkshire Hills Bancorp shareholders are down 23% for the year (even including dividends), but the market itself is up 9.5%. 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. Longer term investors wouldn’t be so upset, since they would have made 5.6%, each year, over five years. 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 is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Berkshire Hills Bancorp 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.
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 firstname.lastname@example.org. 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.