Yahoo Finance ABN AMRO Bank's (AMS:ABN) earnings have declined over five years, contributing to shareholders 38% loss
While it may not be enough for some shareholders, we think it is good to see the ABN AMRO Bank N.V. (AMS:ABN) share price up 22% in a single quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 53%, which falls well short of the return you could get by buying an index fund.
On a more encouraging note the company has added €449m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
View our latest analysis for ABN AMRO Bank
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 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.
Looking back five years, both ABN AMRO Bank's share price and EPS declined; the latter at a rate of 3.9% per year. This reduction in EPS is less than the 14% annual reduction in the share price. 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 5.72.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for ABN AMRO Bank the TSR over the last 5 years was -38%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that ABN AMRO Bank shareholders have received a total shareholder return of 6.0% over the last year. Of course, that includes the dividend. That certainly beats the loss of about 7% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for ABN AMRO Bank you should know about.
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 NL 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.
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