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. We regret to report that long term BancorpSouth Bank (NYSE:BXS) shareholders have had that experience, with the share price dropping 22% in three years, versus a market return of about 32%. It's down 22% in about a quarter. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Although the share price is down over three years, BancorpSouth Bank actually managed to grow EPS by 18% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Revenue is actually up 8.5% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating BancorpSouth Bank further; while we may be missing something on this analysis, there might also be an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for BancorpSouth Bank in this interactive graph of future profit estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for BancorpSouth Bank the TSR over the last 3 years was -17%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in BancorpSouth Bank had a tough year, with a total loss of 16% (including dividends) , against a market gain of about 7.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 3.1% per year over half a decade. 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's always interesting to track share price performance over the longer term. But to understand BancorpSouth Bank better, we need to consider many other factors. For instance, we've identified 4 warning signs for BancorpSouth Bank 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.
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.
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