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Does Keppel DC REIT's (SGX:AJBU) Share Price Gain of 65% Match Its Business Performance?

Simply Wall St

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Keppel DC REIT (SGX:AJBU) share price is up 65% in the last three years, clearly besting the market return of around 3.1% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 58% , including dividends .

See our latest analysis for Keppel DC 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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over the last three years, Keppel DC REIT failed to grow earnings per share, which fell 2.1% (annualized).

Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. Therefore, it makes sense to look into other metrics.

It could be that the revenue growth of 25% per year is viewed as evidence that Keppel DC REIT is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

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

SGX:AJBU Income Statement, October 14th 2019

We know that Keppel DC REIT has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Keppel DC REIT

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Keppel DC REIT, it has a TSR of 97% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Keppel DC REIT rewarded shareholders with a total shareholder return of 58% over the last year. That's including the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 25%. The improving returns to shareholders suggests the stock is becoming more popular with time. Before forming an opinion on Keppel DC REIT you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

Of course Keppel DC REIT may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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