It is easy to match the overall market return by purchasing an index fund. But if you buy individual stocks, you can do better or worse than that. Unfortunately the Embassy Office Parcs FPI The share price (NSE: EMBASSY) slipped 13% year over year. This contrasts poorly with the market return of 67%. Embassy Office Parks REIT could of course have better days; we only looked at a one-year period. On top of that, the stock price fell 5.8% last week.
See our latest review for Embassy Office Parks REIT
To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. An imperfect but reasonable way to gauge how sentiment is changing around a company is to compare earnings per share (EPS) with the stock price.
Unfortunately, Embassy Office Parks REIT reported a 14% drop in BPA for the past year. This proportional drop in earnings per share is not far from the 13% drop in the share price. Given the decline in EPS, we expected investors to lose faith in the stock, but that doesn’t appear to have happened. Instead, the change in the share price appears to reduce earnings per share, on its own.
The image below shows how EPS has tracked over time (if you click on the image you can see more detail).
It might be worth taking a look at our free Embassy Office Parks REIT Profit, Revenue and Cash Flow Report.
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 discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. We note that for Embassy Office Parks REIT, the TSR over the past year was -7.8%, which is better than the share price return mentioned above. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
Given that the market has gained 67% in the past year, shareholders of Embassy Office Parks REIT might be upset that they lost 7.8% (even including dividends). While the goal is to do better than that, it’s worth remembering that even large, long-term investments sometimes underperform for a year or more. Aside from the past twelve months, it’s good to see that the stock price has rebounded 0.7% over the past ninety days. Let’s just hope this isn’t the dreaded “dead cat rebound” (which would point to further declines to come). While it is worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we have identified 2 warning signs for Embassy Office Parks REIT that you need to be aware of.
Sure Embassy Office Parks REIT may not be the best stock to buy. So you might want to see this free collection of growth stocks.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks that currently trade on the IN exchanges.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St does not have any position in the mentioned stocks.
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