Shore Bancshares (NASDAQ:SHBI) investors are sitting on a loss of 43% if they invested a year ago
Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Shore Bancshares, Inc. (NASDAQ:SHBI) have tasted that bitter downside in the last year, as the share price dropped 45%. That's well below the market return of 3.8%. The silver lining (for longer term investors) is that the stock is still 11% higher than it was three years ago. Unfortunately the share price momentum is still quite negative, with prices down 15% in thirty days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Shore Bancshares
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.
Even though the Shore Bancshares share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.
Shore Bancshares' dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. If you are thinking of buying or selling Shore Bancshares stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
While the broader market gained around 3.8% in the last year, Shore Bancshares shareholders lost 43% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Shore Bancshares (of which 1 can't be ignored!) you should know about.
Shore Bancshares is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
