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Did You Manage To Avoid European Residential Real Estate Investment Trust's (CVE:ERE.UN) 18% Share Price Drop?

Simply Wall St

This week we saw the European Residential Real Estate Investment Trust (CVE:ERE.UN) share price climb by 13%. It's not great that the stock is down over the last year. But it did better than its market, which fell 22%.

See our latest analysis for European Residential Real Estate Investment Trust

Because European Residential Real Estate Investment Trust made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year European Residential Real Estate Investment Trust saw its revenue grow by 100%. That's well above most other pre-profit companies. Given that the broader market is down the 18% drop last year isn't too bad. Given the strong revenue growth, it may simply be that the stock is suffering from market conditions. For us, this sort of situation smells of opportunity - the share price is down but the revenue is up. Either way, we'd say the mismatch between the revenue growth and the share price justifies a closer look.

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

TSXV:ERE.UN Income Statement March 31st 2020

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think European Residential Real Estate Investment Trust will earn in the future (free profit forecasts).

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, European Residential Real Estate Investment Trust's TSR for the last year was -15%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's not great that European Residential Real Estate Investment Trust shares failed to make money for shareholders in the last year, but the silver lining is that the loss of 15% , including dividends, wasn't as bad as the broader market loss of about 22%. Things weren't so bad until the last three months, when the stock dropped 23%. The recent drop implies that investors are increasingly averse to the stock -- quite possibly due to a deterioration of the business. However, this could create an opportunity if the fundamentals remain strong. It's always interesting to track share price performance over the longer term. But to understand European Residential Real Estate Investment Trust better, we need to consider many other factors. For instance, we've identified 2 warning signs for European Residential Real Estate Investment Trust that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do 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 CA 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.