Stock Analysis

Reflecting on Ventas' (NYSE:VTR) Share Price Returns Over The Last Year

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NYSE:VTR
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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Ventas, Inc. (NYSE:VTR) shareholders over the last year, as the share price declined 18%. That falls noticeably short of the market return of around 25%. At least the damage isn't so bad if you look at the last three years, since the stock is down 14% in that time. There was little comfort for shareholders in the last week as the price declined a further 1.6%.

View our latest analysis for Ventas

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.

Unhappily, Ventas had to report a 32% decline in EPS over the last year. This fall in the EPS is significantly worse than the 18% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. With a P/E ratio of 51.20, it's fair to say the market sees an EPS rebound on the cards.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NYSE:VTR Earnings Per Share Growth January 13th 2021

It might be well worthwhile taking a look at our free report on Ventas' earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Ventas the TSR over the last year was -13%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Ventas shareholders are down 13% for the year (even including dividends), but the market itself is up 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 1.7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Ventas better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Ventas (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

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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What are the risks and opportunities for Ventas?

Ventas, an S&P 500 company, operates at the intersection of two powerful and dynamic industries – healthcare and real estate.

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Rewards

  • Trading at 21.1% below our estimate of its fair value

  • Earnings are forecast to grow 55.36% per year

Risks

  • Interest payments are not well covered by earnings

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