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Anywhere Real Estate's (NYSE:HOUS) three-year earnings growth trails the solid shareholder returns

·3-min read

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. For instance the Anywhere Real Estate Inc. (NYSE:HOUS) share price is 106% higher than it was three years ago. Most would be happy with that. And in the last month, the share price has gained 20%. But the price may well have benefitted from a buoyant market, since stocks have gained 9.8% in the last thirty days.

Since the stock has added US$197m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Anywhere Real Estate

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Anywhere Real Estate was able to grow its EPS at 58% per year over three years, sending the share price higher. This EPS growth is higher than the 27% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 5.11 also reflects the negative sentiment around the stock.

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

earnings-per-share-growth
earnings-per-share-growth

We know that Anywhere Real Estate has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Anywhere Real Estate's financial health with this free report on its balance sheet.

What About The Total Shareholder Return (TSR)?

We've already covered Anywhere Real Estate's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Anywhere Real Estate's TSR of 109% for the 3 years exceeded its share price return, because it has paid dividends.

A Different Perspective

We regret to report that Anywhere Real Estate shareholders are down 30% for the year. Unfortunately, that's worse than the broader market decline of 10%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. For example, we've discovered 2 warning signs for Anywhere Real Estate that you should be aware of before investing here.

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 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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