Investors more bullish on Granite Real Estate Investment Trust (TSE:GRT.UN) this week as stock grows 4.8%, despite earnings trending downwards over past three years

You can receive the average market return by buying a low-cost index fund. But if you pick the right individual stocks, you could make more than that. For example, the Granite Real Estate Investment Trust (TSE:GRT.UN) share price is up 83% in the last three years, slightly above the market return. In contrast, the stock is actually down 11% in the last year, suggesting a lack of positive momentum.

The past week has proven to be lucrative for Granite Real Estate Investment Trust investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Granite Real Estate Investment Trust

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 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.

Over the last three years, Granite Real Estate Investment Trust failed to grow earnings per share, which fell 30% (annualized).

So we doubt that the market is looking to EPS for its main judge of the company's value. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It could be that the revenue growth of 16% per year is viewed as evidence that Granite Real Estate Investment Trust is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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. You can see what analysts are predicting for Granite Real Estate Investment Trust 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. We note that for Granite Real Estate Investment Trust the TSR over the last 3 years was 105%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 5.9% in the twelve months, Granite Real Estate Investment Trust shareholders did even worse, losing 7.4% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 16% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Granite Real Estate Investment Trust better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Granite Real Estate Investment Trust (of which 1 shouldn't be ignored!) you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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