Does First Savings Financial Group's (NASDAQ:FSFG) Share Price Gain of 100% Match Its Business Performance?
The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But First Savings Financial Group, Inc. (NASDAQ:FSFG) has fallen short of that second goal, with a share price rise of 100% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 56% over the last year.
See our latest analysis for First Savings Financial Group
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).
Over half a decade, First Savings Financial Group managed to grow its earnings per share at 41% a year. This EPS growth is higher than the 15% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 4.06 also suggests market apprehension.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, First Savings Financial Group's TSR for the last 5 years was 111%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
First Savings Financial Group provided a TSR of 58% over the year (including dividends). That's fairly close to the broader market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 16%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with First Savings Financial Group (at least 2 which can't be ignored) , and understanding them should be part of your investment process.
First Savings Financial Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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