Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. Zooming in on an example, the Acadia Realty Trust (NYSE:AKR) share price dropped 62% in the last half decade. That's not a lot of fun for true believers. And some of the more recent buyers are probably worried, too, with the stock falling 56% in the last year.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the five years over which the share price declined, Acadia Realty Trust's earnings per share (EPS) dropped by 18% each year. In this case, the EPS change is really very close to the share price drop of 18% a year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
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 Acadia Realty Trust's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered Acadia Realty Trust's share price action, but we should also mention its total shareholder return (TSR). 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. Its history of dividend payouts mean that Acadia Realty Trust's TSR, which was a 53% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Investors in Acadia Realty Trust had a tough year, with a total loss of 54%, against a market gain of about 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8.9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Acadia Realty Trust better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Acadia Realty Trust (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.
But note: Acadia Realty Trust 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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