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It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Essex Property Trust, Inc. (NYSE:ESS) have tasted that bitter downside in the last year, as the share price dropped 35%. That contrasts poorly with the market return of 23%. At least the damage isn't so bad if you look at the last three years, since the stock is down 18% in that time. On the other hand the share price has bounced 6.9% over the last week.
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. 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 unfortunate twelve months during which the Essex Property Trust share price fell, it actually saw its earnings per share (EPS) improve by 53%. It could be that the share price was previously over-hyped.
It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.
Essex Property Trust's revenue is actually up 9.2% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Essex Property Trust will earn in the future (free profit forecasts).
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, Essex Property Trust's TSR for the last year was -33%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 23% in the last year, Essex Property Trust shareholders lost 33% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 1.6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Essex Property Trust better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Essex Property Trust (including 2 which is can't be ignored) .
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.
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.
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