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The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the Bankwell Financial Group, Inc. (NASDAQ:BWFG) share price is 13% higher than it was a year ago, much better than the market decline of around 15% (not including dividends) in the same period. So that should have shareholders smiling. Having said that, the longer term returns aren't so impressive, with stock gaining just 9.1% in three years.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
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.
Bankwell Financial Group was able to grow EPS by 186% in the last twelve months. This EPS growth is significantly higher than the 13% increase in the share price. Therefore, it seems the market isn't as excited about Bankwell Financial Group as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 8.29.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Bankwell Financial Group's TSR for the last 1 year was 15%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Bankwell Financial Group has rewarded shareholders with a total shareholder return of 15% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 1.2% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 2 warning signs for Bankwell Financial Group (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
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 US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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