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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But Bryn Mawr Bank Corporation (NASDAQ:BMTC) has fallen short of that second goal, with a share price rise of 31% over five years, which is below the market return. Zooming in, the stock is actually down 8.5% in the last year.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over half a decade, Bryn Mawr Bank managed to grow its earnings per share at 8.1% a year. This EPS growth is higher than the 5.6% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Bryn Mawr Bank has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Bryn Mawr Bank's balance sheet strength is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Bryn Mawr Bank's TSR for the last 5 years was 49%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Bryn Mawr Bank shareholders are down 6.0% for the year (even including dividends) , but the market itself is up 9.3%. 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 8.3%, 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. Before spending more time on Bryn Mawr Bank it might be wise to click here to see if insiders have been buying or selling shares.
We will like Bryn Mawr Bank better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.