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NorthWest Healthcare Properties Real Estate Investment Trust (TSE:NWH.UN) sheds 3.4% this week, as yearly returns fall more in line with earnings growth

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  • NWHUF

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the NorthWest Healthcare Properties Real Estate Investment Trust (TSE:NWH.UN) share price is up 38% in the last 5 years, clearly besting the market return of around 28% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 15% , including dividends .

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for NorthWest Healthcare Properties Real Estate Investment Trust

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, NorthWest Healthcare Properties Real Estate Investment Trust achieved compound earnings per share (EPS) growth of 23% per year. This EPS growth is higher than the 7% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 7.06 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of NorthWest Healthcare Properties Real Estate Investment Trust's earnings, revenue and cash flow.

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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of NorthWest Healthcare Properties Real Estate Investment Trust, it has a TSR of 95% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

NorthWest Healthcare Properties Real Estate Investment Trust shareholders are up 15% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 14% per year over five year. 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. Even so, be aware that NorthWest Healthcare Properties Real Estate Investment Trust is showing 5 warning signs in our investment analysis , and 2 of those make us uncomfortable...

NorthWest Healthcare Properties Real Estate Investment Trust is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing 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 CA exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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