Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Elanor Retail Property Fund (ASX:ERF) shareholders have had that experience, with the share price dropping 35% in three years, versus a market return of about 18%. And the ride hasn't got any smoother in recent times over the last year, with the price 30% lower in that time. It's down 3.8% in the last seven days.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Elanor Retail Property Fund saw its EPS decline at a compound rate of 23% per year, over the last three years. In comparison the 13% 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.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Elanor Retail Property Fund has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Elanor Retail Property Fund's TSR for the last 3 years was -21%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
The last twelve months weren't great for Elanor Retail Property Fund shares, which performed worse than the market, costing holders 27% , including dividends . Meanwhile, the broader market slid about 6.6%, likely weighing on the stock. The three-year loss of 7.7% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand Elanor Retail Property Fund better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Elanor Retail Property Fund (of which 1 is significant!) you should know about.
We will like Elanor Retail Property Fund better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
This article by Simply Wall St is general in nature. 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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