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Did You Miss Lexington Realty Trust's (NYSE:LXP) 13% Share Price Gain?

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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Lexington Realty Trust (NYSE:LXP) share price is 13% higher than it was a year ago, much better than the market return of around -8.2% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Unfortunately the longer term returns are not so good, with the stock falling 3.0% in the last three years.

View our latest analysis for Lexington Realty Trust

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the last year Lexington Realty Trust grew its earnings per share (EPS) by 23%. It's fair to say that the share price gain of 13% did not keep pace with the EPS growth. So it seems like the market has cooled on Lexington Realty Trust, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.85.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NYSE:LXP Past and Future Earnings April 16th 2020
NYSE:LXP Past and Future Earnings April 16th 2020

It is of course excellent to see how Lexington Realty Trust has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 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. We note that for Lexington Realty Trust the TSR over the last year was 18%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Lexington Realty Trust has rewarded shareholders with a total shareholder return of 18% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 8.3% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 Lexington Realty Trust (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

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.

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.