Shareholders Of Mackinac Financial (NASDAQ:MFNC) Must Be Happy With Their 53% Return
If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Mackinac Financial Corporation (NASDAQ:MFNC) share price is up 27% in the last five years, that's less than the market return. Unfortunately the share price is down 17% in the last year.
See our latest analysis for Mackinac Financial
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. 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.
Over half a decade, Mackinac Financial managed to grow its earnings per share at 7.3% a year. The EPS growth is more impressive than the yearly share price gain of 5% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 10.00 also suggests market apprehension.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
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. It might be well worthwhile taking a look at our free report on Mackinac Financial's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Mackinac Financial, it has a TSR of 53% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Mackinac Financial shareholders are down 12% for the year (even including dividends), but the market itself is up 31%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 9%, 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's always interesting to track share price performance over the longer term. But to understand Mackinac Financial better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Mackinac Financial (of which 1 is potentially serious!) you should know about.
Mackinac 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.
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. 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.
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