The 12% return this week takes SA Real Estate's (JSE:SAC) shareholders one-year gains to 87%

By
Simply Wall St
Published
January 18, 2022
JSE:SAC
Source: Shutterstock

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the SA Corporate Real Estate Limited (JSE:SAC) share price is 63% higher than it was a year ago, much better than the market return of around 14% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 28% lower than it was three years ago.

Since the stock has added R674m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for SA Real Estate

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 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.

SA Real Estate was able to grow EPS by 91% in the last twelve months. We note, however, that extraordinary items have impacted earnings. This EPS growth is significantly higher than the 63% increase in the share price. So it seems like the market has cooled on SA Real Estate, despite the growth. Interesting.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
JSE:SAC Earnings Per Share Growth January 18th 2022

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, SA Real Estate's TSR for the last 1 year was 87%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that SA Real Estate shareholders have received a total shareholder return of 87% over one year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand SA Real Estate better, we need to consider many other factors. Even so, be aware that SA Real Estate is showing 3 warning signs in our investment analysis , and 2 of those can't be ignored...

But note: SA Real Estate may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on ZA exchanges.

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