One Liberty Properties (NYSE:OLP) shareholders have earned a 16% CAGR over the last three years
One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, One Liberty Properties, Inc. (NYSE:OLP) shareholders have seen the share price rise 26% over three years, well in excess of the market return (15%, not including dividends).
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for One Liberty Properties
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
One Liberty Properties was able to grow its EPS at 8.8% per year over three years, sending the share price higher. We note that the 8% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This suggests that sentiment and expectations have not changed drastically. Quite to the contrary, the share price has arguably reflected the EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on One Liberty Properties' earnings, revenue and cash flow.
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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, One Liberty Properties' TSR for the last 3 years was 57%, 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 gained around 16% in the last year, One Liberty Properties shareholders lost 11% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for One Liberty Properties (1 can't be ignored!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.
