Investing in NexPoint Real Estate Finance (NYSE:NREF) a year ago would have delivered you a 0.7% gain
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in NexPoint Real Estate Finance, Inc. (NYSE:NREF) have tasted that bitter downside in the last year, as the share price dropped 14%. That's disappointing when you consider the market returned 10%. The silver lining (for longer term investors) is that the stock is still 11% higher than it was three years ago.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for NexPoint Real Estate Finance
NexPoint Real Estate Finance wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In just one year NexPoint Real Estate Finance saw its revenue fall by 54%. If you think that's a particularly bad result, you're statistically on the money Meanwhile, the share price dropped by 14%. We would want to see improvements in the core business, and diminishing losses, before getting too excited about this one.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for NexPoint Real Estate Finance the TSR over the last 1 year was 0.7%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
NexPoint Real Estate Finance shareholders are up 0.7% for the year (even including dividends). Unfortunately this falls short of the market return of around 10%. At least the longer term returns (running at about 16% a year, are better. Even the best companies don't see strong share price performance every year. It's always interesting to track share price performance over the longer term. But to understand NexPoint Real Estate Finance better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with NexPoint Real Estate Finance .
NexPoint Real Estate Finance is not the only stock that insiders are buying. 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 American 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.
