Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. To wit, the Lakeland Financial share price has climbed 85% in five years, easily topping the market return of 48% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 1.0%, including dividends.
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. 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.
Over half a decade, Lakeland Financial managed to grow its earnings per share at 15% a year. So the EPS growth rate is rather close to the annualized share price gain of 13% per year. That suggests that the market sentiment around the company hasn't changed much over that time. 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).
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. It might be well worthwhile taking a look at our free report on Lakeland Financial's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Lakeland Financial, it has a TSR of 107% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Lakeland Financial provided a TSR of 1.0% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 16% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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 Lakeland Financial by clicking this link.
Lakeland 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.
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.