Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. You won’t get it right every time, but when you do, the returns can be truly splendid. One bright shining star stock has been Innovative Industrial Properties, Inc. (NYSE:IIPR), which is 612% higher than three years ago. On top of that, the share price is up 44% in about a quarter. This could be related to the recent financial results, released recently – you can catch up on the most recent data by reading our company report.
Anyone who held for that rewarding ride would probably be keen to talk about it.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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 three years of share price growth, Innovative Industrial Properties moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Innovative Industrial Properties’ TSR for the last 3 years was 691%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Pleasingly, Innovative Industrial Properties’ total shareholder return last year was 25%. That’s including the dividend. But the three year TSR of 99% per year is even better. It’s always interesting to track share price performance over the longer term. But to understand Innovative Industrial Properties better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we’ve spotted with Innovative Industrial Properties (including 1 which is shouldn’t be ignored) .
Innovative Industrial Properties 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 US exchanges.
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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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