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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you’d like to see the share price move up more than the market average. But Monmouth Real Estate Investment Corporation (NYSE:MNR) has fallen short of that second goal, with a share price rise of 42% over five years, which is below the market return. However, if you include the dividends then the return is market beating. Zooming in, the stock is actually down 1.5% in the last year.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ By comparing earnings per share (EPS) and 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, Monmouth Real Estate Investment managed to grow its earnings per share at 8.6% a year. We note, however, that extraordinary items have impacted earnings. So the EPS growth rate is rather close to the annualized share price gain of 7.2% per year. Therefore one could conclude that sentiment towards the shares hasn’t morphed very much. Indeed, it would appear the share price is reacting to the EPS.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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 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. In the case of Monmouth Real Estate Investment, it has a TSR of 83% for the last 5 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
Monmouth Real Estate Investment shareholders gained a total return of 3.0% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 13% a year, over half a decade) look better. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. The data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
Monmouth Real Estate Investment 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.