It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Republic First Bancorp, Inc. (NASDAQ:FRBK) shareholders over the last year, as the share price declined 40%. That's well bellow the market return of 2.0%. The silver lining (for longer term investors) is that the stock is still 4.6% higher than it was three years ago. Furthermore, it's down 13% in about a quarter. That's not much fun for holders.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unfortunately Republic First Bancorp reported an EPS drop of 44% for the last year. We note that the 40% share price drop is very close to the EPS drop. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.
The graphic below depicts how EPS has changed over time (unveil 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. This free interactive report on Republic First Bancorp's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Republic First Bancorp had a tough year, with a total loss of 40%, against a market gain of about 2.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 1.8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.