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Is Rexford Industrial Realty's (NYSE:REXR) Share Price Gain Of 194% Well Earned?

Simply Wall St

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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Rexford Industrial Realty, Inc. (NYSE:REXR) share price has soared 194% in the last half decade. Most would be very happy with that. It's also good to see the share price up 12% over the last quarter.

See our latest analysis for Rexford Industrial Realty

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 last half decade, Rexford Industrial Realty became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. 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. We can see that the Rexford Industrial Realty share price is up 92% in the last three years. Meanwhile, EPS is up 86% per year. This EPS growth is higher than the 24% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. Of course, with a P/E ratio of 119.37, the market remains optimistic.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NYSE:REXR Past and Future Earnings, July 9th 2019

It is of course excellent to see how Rexford Industrial Realty has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Rexford Industrial Realty stock, you should check out this FREE detailed report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Rexford Industrial Realty, it has a TSR of 234% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Rexford Industrial Realty has rewarded shareholders with a total shareholder return of 35% in the last twelve months. And that does include the dividend. That's better than the annualised return of 27% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.