Yahoo Finance Equity Bancshares' (NYSE:EQBK) investors will be pleased with their respectable 52% return over the last year
Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Equity Bancshares, Inc. (NYSE:EQBK) share price is up 49% in the last 1 year, clearly besting the market return of around 26% (not including dividends). So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 3.0% higher than it was three years ago.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Equity Bancshares
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 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.
Over the last twelve months, Equity Bancshares actually shrank its EPS by 82%.
This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
We doubt the modest 1.4% dividend yield is doing much to support the share price. Equity Bancshares' revenue actually dropped 27% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Equity Bancshares will earn in the future (free profit forecasts).
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Equity Bancshares, it has a TSR of 52% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Equity Bancshares shareholders have received a total shareholder return of 52% over the last year. That's including the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 2 warning signs for Equity Bancshares you should be aware of.
Equity Bancshares is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
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.
