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Shareholders in Apartment Income REIT (NYSE:AIRC) have lost 9.7%, as stock drops 5.3% this past week

It's easy to feel disappointed if you buy a stock that goes down. But often it is not a reflection of the fundamental business performance. The Apartment Income REIT Corp. (NYSE:AIRC) is down 13% over a year, but the total shareholder return is -9.7% once you include the dividend. That's better than the market which declined 11% over the last year. Because Apartment Income REIT hasn't been listed for many years, the market is still learning about how the business performs. The share price has dropped 16% in three months.

If the past week is anything to go by, investor sentiment for Apartment Income REIT isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Apartment Income REIT

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. 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).

During the last year Apartment Income REIT grew its earnings per share, moving from a loss to a profit.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action. So it makes sense to check out some other factors.

We don't see any weakness in the Apartment Income REIT's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

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. If you are thinking of buying or selling Apartment Income REIT stock, you should check out this free report showing analyst profit 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 Apartment Income REIT the TSR over the last 1 year was -9.7%, 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

While they no doubt would have preferred make a profit, at least Apartment Income REIT shareholders didn't do too badly in the last year. Their loss of 9.7%, including dividends, actually beat the broader market, which lost around 11%. However, the problem arose in the last three months, which saw the share price drop 16%. The recent drop implies that investors are increasingly averse to the stock -- quite possibly due to a deterioration of the business. In times of uncertainty we usually try to focus on the long term fundamental business metrics. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 6 warning signs we've spotted with Apartment Income REIT (including 3 which are significant) .

Apartment Income REIT is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.