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Did Changing Sentiment Drive Urban Edge Properties's (NYSE:UE) Share Price Down By 36%?

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For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Urban Edge Properties (NYSE:UE) shareholders have had that experience, with the share price dropping 36% in three years, versus a market return of about 37%. There was little comfort for shareholders in the last week as the price declined a further 1.9%.

Check out our latest analysis for Urban Edge Properties

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 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.

Although the share price is down over three years, Urban Edge Properties actually managed to grow EPS by 11% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Urban Edge Properties has actually grown its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).

NYSE:UE Income Statement, June 4th 2019
NYSE:UE Income Statement, June 4th 2019

We know that Urban Edge Properties has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Urban Edge Properties in this interactive graph of future profit estimates.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Urban Edge Properties's TSR for the last 3 years was -29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Urban Edge Properties shareholders are down 16% for the year (even including dividends), falling short of the market return. The market shed around 0.7%, no doubt weighing on the stock price. Shareholders have lost 11% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Keeping this in mind, a solid next step might be to take a look at Urban Edge Properties's dividend track record. This free interactive graph is a great place to start.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.