Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Washington Real Estate Investment Trust (NYSE:WRE) shareholders have had that experience, with the share price dropping 35% in three years, versus a market return of about 41%. And over the last year the share price fell 24%, so we doubt many shareholders are delighted.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Washington Real Estate Investment Trust moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it’s worth checking some other metrics too.
We note that the dividend seems healthy enough, so that probably doesn’t explain the share price drop. Washington Real Estate Investment Trust has maintained its top line over three years, so we doubt that has shareholders worried. So it might be worth looking at how revenue growth over time, in greater detail.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Washington Real Estate Investment Trust has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Washington Real Estate Investment Trust
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Washington Real Estate Investment Trust the TSR over the last 3 years was -27%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Washington Real Estate Investment Trust shareholders are down 21% for the year (even including dividends), but the market itself is up 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 0.3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Washington Real Estate Investment Trust better, we need to consider many other factors. Take risks, for example – Washington Real Estate Investment Trust has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
Of course Washington Real Estate Investment Trust may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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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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