Yahoo Finance Medallion Financial (NASDAQ:MFIN) delivers shareholders notable 8.7% CAGR over 5 years, surging 23% in the last week alone
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. But Medallion Financial Corp. (NASDAQ:MFIN) has fallen short of that second goal, with a share price rise of 36% over five years, which is below the market return. Meanwhile, the last twelve months saw the share price rise 5.0%.
Since the stock has added US$35m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View our latest analysis for Medallion Financial
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 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 the last half decade, Medallion Financial became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Medallion Financial has grown profits over the years, but the future is more important for shareholders. This free interactive report on Medallion Financial's balance sheet strength is a great place to start, if you want to investigate the stock further.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Medallion Financial the TSR over the last 5 years was 51%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Medallion Financial shareholders gained a total return of 9.9% during the year. 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 9% over half a decade This suggests the company might be improving over time. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Medallion Financial (of which 2 are a bit concerning!) you should know about.
Of course Medallion Financial may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
