While it may not be enough for some shareholders, we think it is good to see the Investors Real Estate Trust (NYSE:IRET) share price up 11% in a single quarter. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 33% in that half decade.
Given that Investors Real Estate Trust didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last five years Investors Real Estate Trust saw its revenue shrink by 6.4% per year. While far from catastrophic that is not good. The share price decline at a rate of 7.8% per year is disappointing. But it doesn’t surprise given the falling revenue. It might be worth watching for signs of a turnaround – buyers are probably expecting one.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Investors Real Estate Trust in this interactive graph of future profit estimates.
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 discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Investors Real Estate Trust, it has a TSR of -9.9% for the last 5 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 Investors Real Estate Trust shareholders have received a total shareholder return of 29% over one year. Of course, that includes the dividend. That certainly beats the loss of about 2.1% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.