It's understandable if you feel frustrated when a stock you own sees a lower share price. But often it is not a reflection of the fundamental business performance. The Target Healthcare REIT PLC (LON:THRL) is down 12% over a year, but the total shareholder return is -6.4% once you include the dividend. That's better than the market which returned -20% over the last year. However, the longer term returns haven't been so bad, with the stock down 8.6% in the last three years. Unfortunately the last month hasn't been any better, with the share price down 15%. However, we note the price may have been impacted by the broader market, which is down 29% in the same time period.
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.
Unfortunately Target Healthcare REIT reported an EPS drop of 17% for the last year. This fall in the EPS is significantly worse than the 12% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Target Healthcare REIT's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Target Healthcare REIT the TSR over the last year was -6.4%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While it's certainly disappointing to see that Target Healthcare REIT shares lost 6.4% throughout the year, that wasn't as bad as the market loss of 20%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 5.7% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Even so, be aware that Target Healthcare REIT is showing 3 warning signs in our investment analysis , you should know about...
But note: Target Healthcare REIT 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 GB exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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