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It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by FFBW, Inc. (NASDAQ:FFBW) shareholders over the last year, as the share price declined 15%. That contrasts poorly with the market return of -1.1%. FFBW hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The share price has dropped 21% in three months. Of course, this share price action may well have been influenced by the 12% decline in the broader market, throughout the period.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the unfortunate twelve months during which the FFBW share price fell, it actually saw its earnings per share (EPS) improve by 44%. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
FFBW managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
FFBW shareholders are down 15% for the year, even worse than the market loss of 1.1%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. It's worth noting that the last three months did the real damage, with a 21% decline. So it seems like some holders have been dumping the stock of late - and that's not bullish. It's always interesting to track share price performance over the longer term. But to understand FFBW better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with FFBW , and understanding them should be part of your investment process.
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.
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. Thank you for reading.