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Some Peapack-Gladstone Financial (NASDAQ:PGC) Shareholders Are Down 42%

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Simply Wall St
·4 min read
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Peapack-Gladstone Financial Corporation (NASDAQ:PGC) shareholders should be happy to see the share price up 14% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 42% in the last three years, significantly under-performing the market.

Check out our latest analysis for Peapack-Gladstone Financial

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. 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 unfortunate three years of share price decline, Peapack-Gladstone Financial actually saw its earnings per share (EPS) improve by 15% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

With a rather small yield of just 1.2% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 12% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Peapack-Gladstone Financial more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NasdaqGS:PGC Income Statement April 15th 2020
NasdaqGS:PGC Income Statement April 15th 2020

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Peapack-Gladstone Financial in this interactive graph of future profit estimates.

What about the Total Shareholder Return (TSR)?

We've already covered Peapack-Gladstone Financial's share price action, but we should also mention its total shareholder return (TSR). 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. Peapack-Gladstone Financial's TSR of was a loss of 41% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 3.5% in the twelve months, Peapack-Gladstone Financial shareholders did even worse, losing 37% (even including dividends) . Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2.8% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For instance, we've identified 2 warning signs for Peapack-Gladstone Financial (1 is a bit concerning) that you should be aware of.

Peapack-Gladstone Financial 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 editorial-team@simplywallst.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.

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. Thank you for reading.