Investors can earn very close to the average market return by buying an index fund. But in any given year a good portion of stocks will fall short of that. That’s what happened in the case of CapitaLand Mall Trust (SGX:C38U): its share price dropped 24% while the market declined 19%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 1.0% in three years.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 CapitaLand Mall Trust reported an EPS drop of 1.3% for the last year. This reduction in EPS is not as bad as the 24% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 10.63 also points to the negative market sentiment.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on CapitaLand Mall Trust’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CapitaLand Mall Trust’s TSR for the last year was -21%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
The total return of 21% received by CapitaLand Mall Trust shareholders over the last year isn’t far from the market return of -19%. The silver lining is that longer term investors would have made a total return of 3.9% per year over half a decade. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. It’s always interesting to track share price performance over the longer term. But to understand CapitaLand Mall Trust better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with CapitaLand Mall Trust (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
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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. 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.
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