As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Ascott Residence Trust ( SGX:HMN ) shareholders, since the share price is down 12% in the last three years, falling well short of the market decline of around 5.0%.
If the past week is anything to go by, investor sentiment for Ascott Residence Trust isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).
Over the three years that the share price declined, Ascott Residence Trust's earnings per share (EPS) dropped significantly, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Ascott Residence Trust'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 and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ascott Residence Trust the TSR over the last 3 years was 7.4%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Ascott Residence Trust provided a TSR of 2.6% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 3% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Ascott Residence Trust better, we need to consider many other factors. Even so, be aware that Ascott Residence Trust is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
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.