Would Shareholders Who Purchased RioCan Real Estate Investment Trust's (TSE:REI.UN) Stock Year Be Happy With The Share price Today?

By
Simply Wall St
Published
December 29, 2020
TSX:REI.UN
Source: Shutterstock

RioCan Real Estate Investment Trust (TSE:REI.UN) shareholders should be happy to see the share price up 21% in the last quarter. But that is minimal compensation for the share price under-performance over the last year. In fact the stock is down 36% in the last year, well below the market return.

Check out our latest analysis for RioCan 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.

Unfortunately RioCan Real Estate Investment Trust reported an EPS drop of 97% for the last year. The share price fall of 36% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. With a P/E ratio of 264.25, it's fair to say the market sees an EPS rebound on the cards.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
TSX:REI.UN Earnings Per Share Growth December 30th 2020

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of RioCan Real Estate Investment Trust, it has a TSR of -31% for the last year. 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

RioCan Real Estate Investment Trust shareholders are down 31% for the year (even including dividends), but the market itself is up 4.8%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.2% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - RioCan Real Estate Investment Trust has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

RioCan Real Estate Investment Trust 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 CA exchanges.

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