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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Healthcare Trust of America, Inc. (NYSE:HTA) have tasted that bitter downside in the last year, as the share price dropped 16%. That contrasts poorly with the market return of 25%. Looking at the longer term, the stock is down 15% over three years. It's down 2.1% in the last seven days.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unhappily, Healthcare Trust of America had to report a 12% decline in EPS over the last year. The share price decline of 16% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business. Of course, with a P/E ratio of 166.15, the market remains optimistic.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Healthcare Trust of America the TSR over the last year was -12%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Healthcare Trust of America shareholders are down 12% for the year (even including dividends), but the market itself is up 25%. 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 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For instance, we've identified 5 warning signs for Healthcare Trust of America (1 shouldn't be ignored) that you should be aware of.
Healthcare Trust of America 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.
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. 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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