Yahoo Finance Investors in Franklin Financial Services (NASDAQ:FRAF) have unfortunately lost 12% over the last five years
The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Franklin Financial Services Corporation (NASDAQ:FRAF) shareholders for doubting their decision to hold, with the stock down 28% over a half decade. Shareholders have had an even rougher run lately, with the share price down 10% in the last 90 days.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
View our latest analysis for Franklin Financial Services
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 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.
During the unfortunate half decade during which the share price slipped, Franklin Financial Services actually saw its earnings per share (EPS) improve by 17% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.
We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It's not immediately clear to us why the stock price is down but further research might provide some answers.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Franklin Financial Services' earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Franklin Financial Services, it has a TSR of -12% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Franklin Financial Services had a tough year, with a total loss of 8.5% (including dividends), against a market gain of about 23%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Franklin Financial Services is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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.
