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Did You Miss Retail Properties of America's (NYSE:RPAI) 20% Share Price Gain?

Simply Wall St

We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. Unfortunately for shareholders, while the Retail Properties of America, Inc. (NYSE:RPAI) share price is up 20% in the last year, that falls short of the market return. In contrast, the longer term returns are negative, since the share price is 12% lower than it was three years ago.

View our latest analysis for Retail Properties of America

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year, Retail Properties of America actually saw its earnings per share drop 83%.

This means it's unlikely the market is judging the company based on earnings growth. 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.

Absent any improvement, we don't think a thirst for dividends is pushing up the Retail Properties of America's share price. The slightly diminished revenue is not particularly impressive, at a glance, so that doesn't explain the share price boost.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NYSE:RPAI Income Statement, December 21st 2019

Balance sheet strength is crucial. 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Retail Properties of America, it has a TSR of 27% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Retail Properties of America provided a TSR of 27% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 0.3% per year over five year. This suggests the company might be improving over time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.