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Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Bankwell Financial Group, Inc. (NASDAQ:BWFG) shareholders, since the share price is down 16% in the last three years, falling well short of the market return of around 24%. Even worse, it's down 12% in about a month, which isn't fun at all.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Bankwell Financial Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Bankwell Financial Group saw its EPS decline at a compound rate of 6.9% per year, over the last three years. In comparison the 6% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bankwell Financial Group the TSR over the last 3 years was -8.3%, 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
Bankwell Financial Group shareholders are up 6.0% for the year (even including dividends). But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 4% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Bankwell Financial Group better, we need to consider many other factors. Even so, be aware that Bankwell Financial Group is showing 1 warning sign in our investment analysis , you should know about...