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A diverse portfolio of stocks will always have winners and losers. But the goal is to pick stocks that do better than average. One such company is Plaza Retail REIT (TSE:PLZ.UN), which saw its share price increase 32% in the last year, slightly above the market return of around 30% (not including dividends). The longer term returns have not been as good, with the stock price only 13% higher than it was three years ago.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the last year Plaza Retail REIT grew its earnings per share, moving from a loss to a profit.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
We haven't seen Plaza Retail REIT increase dividend payments yet, so the yield probably hasn't helped drive the share higher. It seems far more likely that the 6.2% boost to the revenue over the last year, is making the difference. Revenue growth often does precede earnings growth, so some investors might be willing to forgo profits today because they have their eyes fixed firmly on the future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Plaza Retail REIT will earn in the future (free profit forecasts).
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Plaza Retail REIT's TSR for the last 1 year was 41%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Plaza Retail REIT shareholders have received a total shareholder return of 41% over one year. That's including the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Case in point: We've spotted 2 warning signs for Plaza Retail REIT you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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.
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