Welltower's (NYSE:WELL) Stock Price Has Reduced 30% In The Past Year
It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Welltower Inc. (NYSE:WELL) share price slid 30% over twelve months. That falls noticeably short of the market return of around 17%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 20% in three years. It's down 2.1% in the last seven days.
View our latest analysis for Welltower
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 unfortunate twelve months during which the Welltower share price fell, it actually saw its earnings per share (EPS) improve by 109%. Of course, the situation might betray previous over-optimism about growth.
The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.
We don't see any weakness in the Welltower's dividend so the steady payout can't really explain the share price drop. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Unless, of course, the market was expecting a revenue uptick.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Welltower has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Welltower in this interactive graph of future profit estimates.
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 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, Welltower's TSR for the last year was -27%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Welltower had a tough year, with a total loss of 27% (including dividends), against a market gain of about 17%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 2.7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Welltower better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Welltower (at least 2 which are concerning) , and understanding them should be part of your investment process.
We will like Welltower 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 US 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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