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Did Charter Hall Social Infrastructure REIT's (ASX:CQE) Share Price Deserve to Gain 67%?

Simply Wall St

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Charter Hall Social Infrastructure REIT (ASX:CQE) share price is up 67% in the last 5 years, clearly besting the market return of around 18% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 13% , including dividends .

See our latest analysis for Charter Hall Social Infrastructure REIT

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Charter Hall Social Infrastructure REIT actually saw its EPS drop 1.7% per year.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. 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.

In fact, the dividend has increased over time, which is a positive. Maybe dividend investors have helped support the share price. We'd posit that the revenue growth over the last five years, of 9.8% per year, would encourage people to invest.

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

ASX:CQE Income Statement, February 3rd 2020

Take a more thorough look at Charter Hall Social Infrastructure REIT's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Charter Hall Social Infrastructure REIT, it has a TSR of 118% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Charter Hall Social Infrastructure REIT provided a TSR of 13% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 17% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Charter Hall Social Infrastructure REIT , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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.

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. Thank you for reading.