Stock Analysis

Safehold (NYSE:SAFE) Has Gifted Shareholders With A Fantastic 296% Total Return On Their Investment

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NYSE:SAFE
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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For instance the Safehold Inc. (NYSE:SAFE) share price is 269% higher than it was three years ago. That sort of return is as solid as granite. Also pleasing for shareholders was the 20% gain in the last three months.

Check out our latest analysis for Safehold

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...' 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 three years of share price growth, Safehold achieved compound earnings per share growth of 147% per year. This EPS growth is higher than the 55% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. Of course, with a P/E ratio of 58.81, 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:SAFE Earnings Per Share Growth November 30th 2020

We know that Safehold has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Safehold's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Safehold, it has a TSR of 296% 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

We're pleased to report that Safehold rewarded shareholders with a total shareholder return of 65% over the last year. And yes, that does include the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 58%. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 2 warning signs for Safehold (1 is a bit concerning) that you should be aware of.

We will like Safehold better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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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What are the risks and opportunities for Safehold?

Safehold Inc. (NYSE: SAFE) is revolutionizing real estate ownership by providing a new and better way for owners to unlock the value of the land beneath their buildings.

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Rewards

  • Price-To-Earnings ratio (16.1x) is below the REITs industry average (27.5x)

  • Earnings are forecast to grow 12.09% per year

  • Earnings grew by 101% over the past year

Risks

  • Interest payments are not well covered by earnings

  • Shareholders have been diluted in the past year

  • Large one-off items impacting financial results

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