The past five years for Bread Financial Holdings (NYSE:BFH) investors has not been profitable
While not a mind-blowing move, it is good to see that the Bread Financial Holdings, Inc. (NYSE:BFH) share price has gained 13% in the last three months. But that is little comfort to those holding over the last half decade, sitting on a big loss. The share price has failed to impress anyone , down a sizable 78% during that time. So we're not so sure if the recent bounce should be celebrated. Of course, this could be the start of a turnaround.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for Bread Financial Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the five years over which the share price declined, Bread Financial Holdings' earnings per share (EPS) dropped by 2.8% each year. This reduction in EPS is less than the 26% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 2.52 further reflects this reticence.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Bread Financial Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Bread Financial Holdings' TSR for the last 5 years was -70%, 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
Bread Financial Holdings shareholders gained a total return of 23% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 11% per year, over five years. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Bread Financial Holdings is showing 3 warning signs in our investment analysis , and 1 of those shouldn't be ignored...
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
