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As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Investar Holding Corporation (NASDAQ:ISTR) shareholders have had that experience, with the share price dropping 11% in three years, versus a market return of about 37%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Investar Holding
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years that the share price fell, Investar Holding's earnings per share (EPS) dropped by 0.3% each year. This reduction in EPS is slower than the 4% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Investar Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. We note that for Investar Holding the TSR over the last 3 years was -6.8%, 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
Although it hurts that Investar Holding returned a loss of 4.2% in the last twelve months, the broader market was actually worse, returning a loss of 19%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 0.5% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. It's always interesting to track share price performance over the longer term. But to understand Investar Holding better, we need to consider many other factors. Take risks, for example - Investar Holding has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.