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The Vicinity Centres (ASX:VCX) Share Price Is Down 11% So Some Shareholders Are Getting Worried

Simply Wall St

As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Vicinity Centres (ASX:VCX) shareholders have had that experience, with the share price dropping 11% in three years, versus a market return of about 37%.

View our latest analysis for Vicinity Centres

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.

During the three years that the share price fell, Vicinity Centres's earnings per share (EPS) dropped by 28% each year. This fall in the EPS is worse than the 4.0% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

ASX:VCX Past and Future Earnings, October 22nd 2019
ASX:VCX Past and Future Earnings, October 22nd 2019

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Vicinity Centres's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Vicinity Centres's TSR for the last 3 years was 6.3%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Vicinity Centres produced a TSR of 5.5% over the last year. While you don't go broke making a profit, this return was actually lower than the average market return of about 17%. On the bright side that gain is actually better than the average return of 2.1% over the last three years, implying that the company is doing better recently. If the business can justify the share price gain with improving fundamental data, then there could be more gains to come. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Vicinity Centres is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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