Douglas Emmett (NYSE:DEI) stock falls 3.4% in past week as three-year earnings and shareholder returns continue downward trend
Investing in stocks inevitably means buying into some companies that perform poorly. But long term Douglas Emmett, Inc. (NYSE:DEI) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 64% drop in the share price over that period. And over the last year the share price fell 53%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 20% in the last three months.
After losing 3.4% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for Douglas Emmett
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 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.
During the three years that the share price fell, Douglas Emmett's earnings per share (EPS) dropped by 6.8% each year. This reduction in EPS is slower than the 29% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Douglas Emmett's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Douglas Emmett's TSR for the last 3 years was -60%, 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
While the broader market lost about 16% in the twelve months, Douglas Emmett shareholders did even worse, losing 51% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Douglas Emmett better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Douglas Emmett .
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 US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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