If you buy and hold a stock for many years, you’d hope to be making a profit. Better yet, you’d like to see the share price move up more than the market average. Unfortunately for shareholders, while the The Bank of New York Mellon Corporation (NYSE:BK) share price is up 23% in the last five years, that’s less than the market return. Looking at the last year alone, the stock is up 13%.
View our latest analysis for Bank of New York Mellon
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.
During five years of share price growth, Bank of New York Mellon achieved compound earnings per share (EPS) growth of 9.8% per year. This EPS growth is higher than the 4.2% average annual increase in the share price. So it seems the market isn’t so enthusiastic about the stock these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
NYSE:BK Past and Future Earnings, December 22nd 2019
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Bank of New York Mellon’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bank of New York Mellon the TSR over the last 5 years was 35%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Bank of New York Mellon provided a TSR of 16% over the last twelve months. 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 6.2% over half a decade It is possible that returns will improve along with the business fundamentals. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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