Introducing Easterly Government Properties (NYSE:DEA), A Stock That Climbed 19% In The Last Three Years

By
Simply Wall St
Published
July 27, 2021
NYSE:DEA
Source: Shutterstock

Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the Easterly Government Properties, Inc. (NYSE:DEA) share price is up 19% in the last three years, that falls short of the market return. Disappointingly, the share price is down 3.7% in the last year.

See our latest analysis for Easterly Government Properties

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, Easterly Government Properties achieved compound earnings per share growth of 26% per year. The average annual share price increase of 6% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. Of course, with a P/E ratio of 105.45, the market remains optimistic.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NYSE:DEA Earnings Per Share Growth July 27th 2021

We know that Easterly Government Properties has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Easterly Government Properties, it has a TSR of 38% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Easterly Government Properties shareholders gained a total return of 1.0% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 7% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. For instance, we've identified 4 warning signs for Easterly Government Properties (1 can't be ignored) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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