When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market But OceanFirst Financial Corp. (NASDAQ:OCFC) has fallen short of that second goal, with a share price rise of 52% over five years, which is below the market return. Looking at the last year alone, the stock is up 10%.
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. 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.
During five years of share price growth, OceanFirst Financial achieved compound earnings per share (EPS) growth of 13% per year. The EPS growth is more impressive than the yearly share price gain of 8.7% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. 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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, OceanFirst Financial's TSR for the last 5 years was 73%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
OceanFirst Financial shareholders are up 14% for the year (even including dividends) . But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 12% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand OceanFirst Financial better, we need to consider many other factors. Be aware that OceanFirst Financial is showing 2 warning signs in our investment analysis , you should know about...
OceanFirst Financial 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.
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.
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