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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 Midland States Bancorp, Inc. (NASDAQ:MSBI) have tasted that bitter downside in the last year, as the share price dropped 26%. That falls noticeably short of the market return of around 7.2%. The silver lining (for longer term investors) is that the stock is still 20% higher than it was three years ago. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 8.9%. However, this may be a matter of broader market optimism, since stocks are up 4.1% in the same time.
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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the unfortunate twelve months during which the Midland States Bancorp share price fell, it actually saw its earnings per share (EPS) improve by 346%. It could be that the share price was previously over-hyped. It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.
Midland States Bancorp managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
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 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. You can see what analysts are predicting for Midland States Bancorp in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Midland States Bancorp the TSR over the last year was -24%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
The last twelve months weren't great for Midland States Bancorp shares, which cost holders 24%, including dividends, while the market was up about 7.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Investors are up over three years, booking 9.3% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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 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.