Stock Analysis

Shareholders Of Gladstone Commercial (NASDAQ:GOOD) Must Be Happy With Their 100% Total Return

  •  Updated
NasdaqGS:GOOD
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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Gladstone Commercial Corporation (NASDAQ:GOOD) share price is up 35% in the last five years, that's less than the market return. Unfortunately the share price is down 8.9% in the last year.

See our latest analysis for Gladstone Commercial

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Gladstone Commercial became profitable within the last five years. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. So it might be better to look at other metrics to try to understand the share price.

In fact, the dividend has increased over time, which is a positive. Maybe dividend investors have helped support the share price. We'd posit that the revenue growth over the last five years, of 9.2% per year, would encourage people to invest.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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NasdaqGS:GOOD Earnings and Revenue Growth February 16th 2021

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Gladstone Commercial, it has a TSR of 100% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Gladstone Commercial shareholders are up 0.2% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 15% 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 Gladstone Commercial better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Gladstone Commercial , and understanding them should be part of your investment process.

Gladstone Commercial is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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