By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, Global Medical REIT Inc. (NYSE:GMRE) shareholders have seen the share price rise 82% over three years, well in excess of the market return (52%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 42% in the last year , including dividends .
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).
During three years of share price growth, Global Medical REIT moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Global Medical REIT's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Global Medical REIT, it has a TSR of 127% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Global Medical REIT produced a TSR of 42% over the last year. Unfortunately this falls short of the market return of around 60%. On the bright side that gain is actually better than the average return of 31% over the last three years, implying that the company is doing better recently. If the share price is up as a result of improved business performance, then this kind of improvement may be sustained. It's always interesting to track share price performance over the longer term. But to understand Global Medical REIT better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Global Medical REIT , and understanding them should be part of your investment process.
Global Medical REIT 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.
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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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