It can certainly be frustrating when a stock does not perform as hoped. But when the market is down, you’re bound to have some losers. While the Trinity Capital Inc. (NASDAQ:TRIN) share price is down 12% in the last three years, the total return to shareholders (which includes dividends) was 34%. And that total return actually beats the market return of 19%.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Trinity Capital
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.
Trinity Capital saw its EPS decline at a compound rate of 23% per year, over the last three years. In comparison the 4% compound annual share price decline isn’t as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment — or it may have previously priced some of the drop in.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Trinity Capital’s 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Trinity Capital the TSR over the last 3 years was 34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Over the last year Trinity Capital shareholders have received a TSR of 13%. Unfortunately this falls short of the market return of around 28%. On the other hand, the TSR over three years was worse, at just 10% per year. This suggests the company’s position is improving. If the share price is up as a result of improved business performance, then this kind of improvement may be sustained. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Trinity Capital (at least 3 which make us uncomfortable) , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap 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 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.
