Mid-America Apartment Communities Sheds 6.2% This Week, Yearly Returns Trend Towards Earnings Growth

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Mid-America Apartment Communities, Inc. (NYSE:MAA) shareholders have enjoyed a 55% share price rise over the last half decade, well in excess of the market return of around 36% (not including dividends).

Since the long term performance has been good but there's been a recent pullback of 6.2%, let's check if the fundamentals match the share price.

Check out our latest analysis for Mid-America Apartment Communities

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Mid-America Apartment Communities achieved compound earnings per share (EPS) growth of 19% per year. The EPS growth is more impressive than the yearly share price gain of 9% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

It's probably worth noting that the CEO is paid less than the median at similar sized 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. This free interactive report on Mid-America Apartment Communities' 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Mid-America Apartment Communities' TSR for the last 5 years was 82%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Mid-America Apartment Communities shareholders are down 27% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 21%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 13% 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. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Mid-America Apartment Communities (of which 1 can't be ignored!) you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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. 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.