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Volatility 101: Should Sterling Bancorp (Southfield MI) (NASDAQ:SBT) Shares Have Dropped 26%?

Simply Wall St

Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT) shareholders should be happy to see the share price up 16% in the last quarter. But that doesn't change the fact that the returns over the last year have been less than pleasing. In fact, the price has declined 26% in a year, falling short of the returns you could get by investing in an index fund.

See our latest analysis for Sterling Bancorp (Southfield MI)

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.

During the unfortunate twelve months during which the Sterling Bancorp (Southfield MI) share price fell, it actually saw its earnings per share (EPS) improve by 46%. 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.

Given the yield is quite low, at 0.4%, we doubt the dividend can shed much light on the share price. Sterling Bancorp (Southfield MI)'s revenue is actually up 25% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

NasdaqCM:SBT Income Statement, April 27th 2019

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. You can see what analysts are predicting for Sterling Bancorp (Southfield MI) in this interactive graph of future profit estimates.

A Different Perspective

While Sterling Bancorp (Southfield MI) shareholders are down 26% for the year (even including dividends), the market itself is up 10%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 16%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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 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. Thank you for reading.