A diverse portfolio of stocks will always have winners and losers. Of course, the aim of the game is to pick stocks that do better than an index fund. Live Oak Bancshares, Inc. (NASDAQ:LOB) has done well over the last year, with the stock price up 16% beating the market return of 16% (not including dividends). However, the longer term returns haven't been so impressive, with the stock up just 6.3% in the last three years.
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 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).
Over the last twelve months, Live Oak Bancshares actually shrank its EPS by 81%.
Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We doubt the modest 0.6% dividend yield is doing much to support the share price. Unfortunately Live Oak Bancshares's fell 15% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.
You can see below how earnings and revenue have 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. So it makes a lot of sense to check out what analysts think Live Oak Bancshares will earn in the future (free profit forecasts).
A Different Perspective
Live Oak Bancshares shareholders have gained 16% over twelve months (even including dividends) . This isn't far from the market return of 18%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return of 2.7% over the last three years, implying that the company is doing better recently. We're certainly happy to see the uptick and we hope the underlying business goes on to justify the improved valuation. 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 Live Oak Bancshares by clicking this link.
Live Oak Bancshares 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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