Essential Properties Realty Trust's (NYSE:EPRT) earnings growth rate lags the 27% CAGR delivered to shareholders

January 20, 2022
  •  Updated
May 05, 2022
NYSE:EPRT
Source: Shutterstock

Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But if you pick the right individual stocks, you could make more than that. To wit, Essential Properties Realty Trust, Inc. (NYSE:EPRT) shares are up 79% in three years, besting the market return. Also positive was the solid 27% share price increase over the last twelve months.

In light of the stock dropping 4.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

See our latest analysis for Essential Properties Realty Trust

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

During three years of share price growth, Essential Properties Realty Trust achieved compound earnings per share growth of 43% per year. This EPS growth is higher than the 21% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.

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:EPRT Earnings Per Share Growth January 20th 2022

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Essential Properties Realty Trust's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Essential Properties Realty Trust the TSR over the last 3 years was 104%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Pleasingly, Essential Properties Realty Trust's total shareholder return last year was 32%. That includes the value of the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 27%. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand Essential Properties Realty Trust better, we need to consider many other factors. For instance, we've identified 3 warning signs for Essential Properties Realty Trust (1 is a bit unpleasant) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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