Community Healthcare Trust's (NYSE:CHCT) five-year earnings growth trails the splendid shareholder returns

By
Simply Wall St
Published
October 14, 2021
NYSE:CHCT
Source: Shutterstock

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. Long term Community Healthcare Trust Incorporated (NYSE:CHCT) shareholders would be well aware of this, since the stock is up 107% in five years. Better yet, the share price has risen 5.7% in the last week.

The past week has proven to be lucrative for Community Healthcare Trust investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Community Healthcare Trust

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Community Healthcare Trust managed to grow its earnings per share at 60% a year. This EPS growth is higher than the 16% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 57.45, the market remains optimistic.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NYSE:CHCT Earnings Per Share Growth October 14th 2021

It is of course excellent to see how Community Healthcare Trust has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Community Healthcare Trust, it has a TSR of 165% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Community Healthcare Trust shareholders are up 1.4% 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 22% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. For example, we've discovered 3 warning signs for Community Healthcare Trust (1 is concerning!) that you should be aware of before investing here.

We will like Community Healthcare Trust better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.