Did You Miss AvalonBay Communities's (NYSE:AVB) 25% Share Price Gain?

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. Unfortunately for shareholders, while the AvalonBay Communities, Inc. (NYSE:AVB) share price is up 25% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 13% in the last year.

Check out our latest analysis for AvalonBay Communities

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over half a decade, AvalonBay Communities managed to grow its earnings per share at 9.7% a year. The EPS growth is more impressive than the yearly share price gain of 4.5% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that AvalonBay Communities has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of AvalonBay Communities, it has a TSR of 45% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

AvalonBay Communities shareholders gained a total return of 16% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 7.8% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand AvalonBay Communities better, we need to consider many other factors. Be aware that AvalonBay Communities is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

But note: AvalonBay Communities may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.