Investing in MERLIN Properties SOCIMI (BME:MRL) five years ago would have delivered you a 62% gain

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the MERLIN Properties SOCIMI, S.A. (BME:MRL) share price is up 27% in the last five years, that's less than the market return. Zooming in, the stock is actually down 7.4% in the last year.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Our free stock report includes 2 warning signs investors should be aware of before investing in MERLIN Properties SOCIMI. Read for free now.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years of share price growth, MERLIN Properties SOCIMI moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that MERLIN Properties SOCIMI has improved its bottom line lately, but is it going to grow revenue? Check if analysts think MERLIN Properties SOCIMI will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of MERLIN Properties SOCIMI, it has a TSR of 62% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in MERLIN Properties SOCIMI had a tough year, with a total loss of 4.0% (including dividends), against a market gain of about 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 10% 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 MERLIN Properties SOCIMI better, we need to consider many other factors. Take risks, for example - MERLIN Properties SOCIMI has 2 warning signs (and 1 which is significant) we think you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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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.