Optimism around Reit 1 (TLV:RIT1) delivering new earnings growth may be shrinking as stock declines 6.4% this past week

While it may not be enough for some shareholders, we think it is good to see the Reit 1 Ltd (TLV:RIT1) share price up 28% in a single quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 15% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

After losing 6.4% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Reit 1

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).

Reit 1 saw its EPS decline at a compound rate of 23% per year, over the last three years. In comparison the 5% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Reit 1'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. In the case of Reit 1, it has a TSR of -1.8% for the last 3 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

Reit 1 shareholders gained a total return of 18% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Reit 1 better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Reit 1 (of which 1 is a bit concerning!) you should know about.

But note: Reit 1 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 Israeli 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.