The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Ready Capital Corporation (NYSE:RC) share price had more than doubled in just one year - up 110%. Also pleasing for shareholders was the 18% gain in the last three months. On the other hand, longer term shareholders have had a tougher run, with the stock falling 3.1% in three years.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
Ready Capital went from making a loss to reporting a profit, in the last year.
We think the growth looks very prospective, so we're not surprised the market liked it too. Inflection points like this can be a great time to take a closer look at a company.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Ready Capital's key metrics by checking this interactive graph of Ready Capital'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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ready Capital the TSR over the last year was 135%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Pleasingly, Ready Capital's total shareholder return last year was 135%. And yes, that does include the dividend. That gain actually surpasses the 11% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. 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. Take risks, for example - Ready Capital has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.
But note: Ready Capital 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 US 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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