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Investors can buy low cost index fund if they want to receive the average market return. But in any diversified portfolio of stocks, you’ll see some that fall short of the average. Unfortunately for shareholders, while the Suntec Real Estate Investment Trust (SGX:T82U) share price is up 16% in the last three years, that falls short of the market return. Zooming in, the stock is actually down 0.5% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the last three years, Suntec Real Estate Investment Trust failed to grow earnings per share, which fell 6.5% (annualized). The strong decline in earnings per share suggests the market isn’t using EPS to judge the company. So we’ll need to take a look at some different metrics to try to understand why the share price remains solid.
We doubt the dividend payments explain the share price rise, since we don’t see any improvement in that regard. Given the modest revenue growth, we doubt it explains the share price rise. But a closer look at the numbers might enlighten.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
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. So we recommend checking out this free report showing consensus forecasts
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 incorporates the value of any discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Suntec Real Estate Investment Trust’s TSR for the last 3 years was 36%, 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
It’s nice to see that Suntec Real Estate Investment Trust shareholders have received a total shareholder return of 4.9% over the last year. Of course, that includes the dividend. Having said that, the five-year TSR of 8.7% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. The data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
Suntec Real Estate Investment Trust is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.