Shareholders in Ladder Capital (NYSE:LADR) are in the red if they invested three years ago
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Ladder Capital Corp (NYSE:LADR) shareholders, since the share price is down 45% in the last three years, falling well short of the market return of around 26%. Even worse, it's down 14% in about a month, which isn't fun at all. But this could be related to poor market conditions -- stocks are down 12% in the same time.
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 Ladder Capital
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Ladder Capital saw its EPS decline at a compound rate of 18% per year, over the last three years. So do you think it's a coincidence that the share price has dropped 18% per year, a very similar rate to the EPS? We don't. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Ladder Capital has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
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 Ladder Capital the TSR over the last 3 years was -30%, 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 it's never nice to take a loss, Ladder Capital shareholders can take comfort that , including dividends,their trailing twelve month loss of 13% wasn't as bad as the market loss of around 22%. Longer term investors wouldn't be so upset, since they would have made 0.8%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Ladder Capital better, we need to consider many other factors. Even so, be aware that Ladder Capital is showing 3 warning signs in our investment analysis , you should know about...
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.
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.
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