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On average, over time, stock markets tend to rise higher. This makes investing attractive. But if when you choose to buy stocks, some of them will be below average performers. For example, the Guaranty Bancshares, Inc. (NASDAQ:GNTY), share price is up over the last year, but its gain of 13% trails the market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 1.5% in three years.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year Guaranty Bancshares grew its earnings per share (EPS) by 9.2%. The share price gain of 13% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's 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..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Guaranty Bancshares, it has a TSR of 16% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Guaranty Bancshares produced a TSR of 16% over the last year. It's always nice to make money but this return falls short of the market return which was about 35% for the year. On the bright side that gain is actually better than the average return of 2.9% over the last three years, implying that the company is doing better recently. If the share price is up as a result of improved business performance, then this kind of improvement may be sustained. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Guaranty Bancshares is showing 1 warning sign in our investment analysis , you should know about...
Guaranty Bancshares is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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