Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Bank OZK (NASDAQ:OZK) shareholders over the last year, as the share price declined 38%. That falls noticeably short of the market return of around 6.6%. At least the damage isn't so bad if you look at the last three years, since the stock is down 18% in that time. There was little comfort for shareholders in the last week as the price declined a further 3.6%.
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...' 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.
Unfortunately Bank OZK reported an EPS drop of 8.0% for the last year. This reduction in EPS is not as bad as the 38% share price fall. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 9.11.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Bank OZK's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Bank OZK'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. Its history of dividend payouts mean that Bank OZK's TSR, which was a 36% drop over the last year, was not as bad as the share price return.
A Different Perspective
Investors in Bank OZK had a tough year, with a total loss of 36% (including dividends), against a market gain of about 6.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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.
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.