Investors in MERLIN Properties SOCIMI (BME:MRL) have seen returns of 2.0% over the past five years

Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term MERLIN Properties SOCIMI, S.A. (BME:MRL) shareholders for doubting their decision to hold, with the stock down 20% over a half decade.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

View our latest analysis for MERLIN Properties SOCIMI

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

MERLIN Properties SOCIMI became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

The revenue fall of 0.8% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

MERLIN Properties SOCIMI is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think MERLIN Properties SOCIMI will earn in the future (free analyst consensus 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for MERLIN Properties SOCIMI the TSR over the last 5 years was 2.0%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

MERLIN Properties SOCIMI shareholders are up 5.5% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 0.4% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. Case in point: We've spotted 3 warning signs for MERLIN Properties SOCIMI you should be aware of, and 1 of them is concerning.

But note: MERLIN Properties SOCIMI may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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