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.
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).
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?
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
Interest payments are not well covered by earnings
Shareholders have been diluted in the past year
Large one-off items impacting financial results
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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