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Equinix (REIT) (NASDAQ:EQIX) Has Gifted Shareholders With A Fantastic 206% Total Return On Their Investment

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Equinix, Inc. (REIT) (NASDAQ:EQIX) which saw its share price drive 177% higher over five years. On top of that, the share price is up 13% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 9.6% in 90 days).

View our latest analysis for Equinix (REIT)

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 last half decade, Equinix (REIT) became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Equinix (REIT) share price has gained 74% in three years. In the same period, EPS is up 29% per year. This EPS growth is higher than the 20% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. Having said that, the market is still optimistic, given the P/E ratio of 140.84.

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

earnings-per-share-growth
earnings-per-share-growth

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. This free interactive report on Equinix (REIT)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Equinix (REIT)'s TSR for the last 5 years was 206%, 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 good to see that Equinix (REIT) has rewarded shareholders with a total shareholder return of 45% in the last twelve months. That's including the dividend. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Equinix (REIT) better, we need to consider many other factors. For example, we've discovered 3 warning signs for Equinix (REIT) (1 is a bit unpleasant!) that you should be aware of before investing here.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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