The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market But Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) has fallen short of that second goal, with a share price rise of 45% over five years, which is below the market return. Looking at the last year alone, the stock is up 12%.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Bank of the James Financial Group achieved compound earnings per share (EPS) growth of 6.5% per year. This EPS growth is reasonably close to the 7.6% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Bank of the James Financial Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Bank of the James Financial Group's TSR for the last 5 years was 58%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Bank of the James Financial Group provided a TSR of 14% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 9.6% per year over five year. It is possible that returns will improve along with the business fundamentals. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Bank of the James Financial Group by clicking this link.
Bank of the James Financial Group 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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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