Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT) share price is a whole 54% lower. That's an unpleasant experience for long term holders. And we doubt long term believers are the only worried holders, since the stock price has declined 21% over the last twelve months. More recently, the share price has dropped a further 19% in a month.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Sterling Bancorp (Southfield MI) moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
Arguably, the revenue drop of 9.7% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Sterling Bancorp (Southfield MI) stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Sterling Bancorp (Southfield MI) shareholders are down 21% for the year, but the market itself is up 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Sterling Bancorp (Southfield MI) (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
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.