Even though iStar (NYSE:STAR) has lost US$87m market cap in last 7 days, shareholders are still up 162% over 5 years

By
Simply Wall St
Published
September 27, 2021
NYSE:STAR
Source: Shutterstock

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the iStar Inc. (NYSE:STAR) share price has soared 135% in the last half decade. Most would be very happy with that. It's also good to see the share price up 23% over the last quarter.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for iStar

iStar isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 5 years iStar saw its revenue shrink by 2.3% per year. Given that scenario, we wouldn't have expected the share price to rise 19% per year, but that's what it did. It's a good reminder that expectations about the future, not the past history, always impact share prices. Still, we are a bit cautious in this kind of situation.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NYSE:STAR Earnings and Revenue Growth September 27th 2021

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for iStar the TSR over the last 5 years was 162%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that iStar shareholders have received a total shareholder return of 125% over the last year. That's including the dividend. That's better than the annualised return of 21% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand iStar better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for iStar (of which 2 are a bit unpleasant!) you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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