For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term First Mid Bancshares, Inc. (NASDAQ:FMBH) shareholders have had that experience, with the share price dropping 11% in three years, versus a market return of about 23%. Even worse, it’s down 8.4% in about a month, which isn’t fun at all.
Given the past week has been tough on shareholders, let’s investigate the fundamentals and see what we can learn.
See our latest analysis for First Mid Bancshares
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
Although the share price is down over three years, First Mid Bancshares actually managed to grow EPS by 5.8% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
We’re actually a quite surprised to see the share price down while EPS have grown strongly. Therefore, we should look at some other metrics to try to understand why the market is disappointed.
Revenue is actually up 11% over the three years, so the share price drop doesn’t seem to hinge on revenue, either. It’s probably worth investigating First Mid Bancshares further; while we may be missing something on this analysis, there might also be an opportunity.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling First Mid Bancshares stock, you should check out this free report showing analyst profit forecasts.
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, First Mid Bancshares’ TSR for the last 3 years was -3.3%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
