Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Severn Bancorp, Inc. (NASDAQ:SVBI) have tasted that bitter downside in the last year, as the share price dropped 36%. That falls noticeably short of the market return of around 7.0%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 19% in three years. Shareholders have had an even rougher run lately, with the share price down 31% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
Unfortunately Severn Bancorp reported an EPS drop of 32% for the last year. This proportional reduction in earnings per share isn't far from the 36% decrease in the share price. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
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. Dive deeper into the earnings by checking this interactive graph of Severn Bancorp's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Severn Bancorp's total shareholder return (TSR) and its share price change, which we've covered above. 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. Severn Bancorp's TSR of was a loss of 35% for the year. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in Severn Bancorp had a tough year, with a total loss of 35% (including dividends) , against a market gain of about 7.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4.2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Severn Bancorp better, we need to consider many other factors. Take risks, for example - Severn Bancorp has 5 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
Severn Bancorp 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.
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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. Thank you for reading.