Stock Analysis

American Homes 4 Rent (NYSE:AMH) shareholders have earned a 10% CAGR over the last five years

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NYSE:AMH
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If you want to compound wealth in the stock market, you can do so by buying an index fund. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the American Homes 4 Rent (NYSE:AMH) share price is 54% higher than it was five years ago, which is more than the market average. In comparison, the share price is down 19% in a year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for American Homes 4 Rent

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 half a decade, American Homes 4 Rent managed to grow its earnings per share at 132% a year. The EPS growth is more impressive than the yearly share price gain of 9% over the same period. So one could conclude that the broader market has become more cautious towards the stock. Having said that, the market is still optimistic, given the P/E ratio of 55.29.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
NYSE:AMH Earnings Per Share Growth December 2nd 2022

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on American Homes 4 Rent's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for American Homes 4 Rent the TSR over the last 5 years was 62%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 15% in the twelve months, American Homes 4 Rent shareholders did even worse, losing 18% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 4 warning signs for American Homes 4 Rent you should be aware of, and 1 of them is a bit concerning.

American Homes 4 Rent 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 US exchanges.

What are the risks and opportunities for American Homes 4 Rent?

American Homes 4 Rent (NYSE: AMH) is a leader in the single-family home rental industry and "American Homes 4 Rent" is fast becoming a nationally recognized brand for rental homes, known for high-quality, good value and tenant satisfaction.

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Rewards

  • Earnings grew by 84.9% over the past year

Risks

  • Earnings are forecast to decline by an average of 0.07% per year for the next 3 years

  • Interest payments are not well covered by earnings

  • Large one-off items impacting financial results

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American Homes 4 Rent

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