Eagle Bancorp Montana (NASDAQ:EBMT) investors are sitting on a loss of 36% if they invested three years ago
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) shareholders, since the share price is down 41% in the last three years, falling well short of the market return of around 20%. And the ride hasn't got any smoother in recent times over the last year, with the price 41% lower in that time. The falls have accelerated recently, with the share price down 16% in the last three months. Of course, this share price action may well have been influenced by the 8.3% decline in the broader market, throughout the period.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for Eagle Bancorp Montana
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
Eagle Bancorp Montana saw its EPS decline at a compound rate of 14% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 16% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
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?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Eagle Bancorp Montana the TSR over the last 3 years was -36%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Eagle Bancorp Montana shareholders are down 38% for the year (even including dividends), but the market itself is up 12%. 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 3% 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. It's always interesting to track share price performance over the longer term. But to understand Eagle Bancorp Montana better, we need to consider many other factors. Even so, be aware that Eagle Bancorp Montana is showing 1 warning sign in our investment analysis , you should know about...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
