Shareholders in BrightSpire Capital (NYSE:BRSP) have lost 35%, as stock drops 7.3% this past week
BrightSpire Capital, Inc. (NYSE:BRSP) shareholders should be happy to see the share price up 11% in the last quarter. But if you look at the last five years the returns have not been good. After all, the share price is down 57% in that time, significantly under-performing the market.
Since BrightSpire Capital has shed US$71m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for BrightSpire Capital
We don't think that BrightSpire Capital's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over half a decade BrightSpire Capital reduced its trailing twelve month revenue by 9.9% for each year. That's definitely a weaker result than most pre-profit companies report. It seems appropriate, then, that the share price slid about 9% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how BrightSpire Capital has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling BrightSpire Capital stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for BrightSpire Capital the TSR over the last 5 years was -35%, 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
BrightSpire Capital shareholders are up 1.8% for the year (even including dividends). But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 6% per year, over five years. It could well be that the business is stabilizing. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with BrightSpire Capital (at least 1 which is concerning) , and understanding them should be part of your investment process.
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 American 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.
