Yahoo Finance Investors in Finward Bancorp (NASDAQ:FNWD) have unfortunately lost 34% over the last five years
It is doubtless a positive to see that the Finward Bancorp (NASDAQ:FNWD) share price has gained some 30% in the last three months. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 45% in that time, significantly under-performing the market.
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 Finward 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.
Looking back five years, both Finward Bancorp's share price and EPS declined; the latter at a rate of 3.1% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 11% per year, over the period. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 9.47.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. 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 Finward Bancorp's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Finward Bancorp's TSR for the last 5 years was -34%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 22% in the last year, Finward Bancorp shareholders lost 32% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. 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. 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. Case in point: We've spotted 2 warning signs for Finward Bancorp you should be aware of, and 1 of them is significant.
Finward Bancorp 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.
