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Did MainStreet Bancshares's (NASDAQ:MNSB) Share Price Deserve to Gain 38%?

Simply Wall St

Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you'll see some that fall short of the average. Unfortunately for shareholders, while the MainStreet Bancshares, Inc. (NASDAQ:MNSB) share price is up 38% in the last three years, that falls short of the market return. Looking at more recent returns, the stock is up 6.7% in a year.

See our latest analysis for MainStreet Bancshares

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

MainStreet Bancshares was able to grow its EPS at 25% per year over three years, sending the share price higher. The average annual share price increase of 11% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NasdaqCM:MNSB Past and Future Earnings, February 12th 2020

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. It might be well worthwhile taking a look at our free report on MainStreet Bancshares's earnings, revenue and cash flow.

A Different Perspective

Over the last year MainStreet Bancshares shareholders have received a TSR of 6.7%. Unfortunately this falls short of the market return of around 23%. But the (superior) three-year TSR of 11% per year is some consolation. Even the best companies don't see strong share price performance every year. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for MainStreet Bancshares 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 editorial-team@simplywallst.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.

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.