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Volatility 101: Should Provident Bancorp (NASDAQ:PVBC) Shares Have Dropped 26%?

·3 min read

The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Provident Bancorp, Inc. (NASDAQ:PVBC) share price slid 26% over twelve months. That's well below the market decline of 0.8%. However, the longer term returns haven't been so bad, with the stock down 18% in the last three years. It's down 31% in about a quarter. However, one could argue that the price has been influenced by the general market, which is down 15% in the same timeframe.

See our latest analysis for Provident Bancorp

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the unfortunate twelve months during which the Provident Bancorp share price fell, it actually saw its earnings per share (EPS) improve by 21%. Of course, the situation might betray previous over-optimism about growth.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

Provident Bancorp's revenue is actually up 11% over the last year. 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).

NasdaqCM:PVBC Income Statement April 20th 2020
NasdaqCM:PVBC Income Statement April 20th 2020

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

The last twelve months weren't great for Provident Bancorp shares, which performed worse than the market, costing holders 26%. The market shed around 0.8%, no doubt weighing on the stock price. Shareholders have lost 6.4% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Provident Bancorp you should know about.

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.

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.