Stock Analysis

Plaza Retail REIT (TSE:PLZ.UN) Share Prices Have Dropped 23% In The Last Year

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TSX:PLZ.UN
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The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Plaza Retail REIT (TSE:PLZ.UN) have tasted that bitter downside in the last year, as the share price dropped 23%. That's well below the market decline of 1.6%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 16% in three years.

View our latest analysis for Plaza Retail REIT

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Plaza Retail REIT fell to a loss making position during the year. Some investors no doubt dumped the stock as a result. Of course, if the company can turn the situation around, investors will likely profit.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
TSX:PLZ.UN Earnings Per Share Growth November 23rd 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Plaza Retail REIT's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Plaza Retail REIT's TSR for the last year was -16%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Investors in Plaza Retail REIT had a tough year, with a total loss of 16% (including dividends), against a market gain of about 1.6%. 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. On the bright side, long term shareholders have made money, with a gain of 0.9% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Plaza Retail REIT is showing 3 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

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 CA exchanges.

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