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The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Franklin Financial Network, Inc. (NYSE:FSB) shareholders over the last year, as the share price declined 30%. That's disappointing when you consider the market returned 4.6%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 15% in three years. The good news is that the stock is up 1.6% in the last week.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Unhappily, Franklin Financial Network had to report a 18% decline in EPS over the last year. The share price decline of 30% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Franklin Financial Network's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren't great for Franklin Financial Network shares, which cost holders 29%, including dividends, while the market was up about 4.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 5.2% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.