For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Veris Residential, Inc. (NYSE:VRE), since the last five years saw the share price fall 49%. The falls have accelerated recently, with the share price down 18% in the last three months. But this could be related to the weak market, which is down 15% in the same period.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Because Veris Residential made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last five years Veris Residential saw its revenue shrink by 17% per year. That's definitely a weaker result than most pre-profit companies report. It seems pretty reasonable to us that the share price dipped 8% per year in that time. This loss means the stock shareholders are probably pretty annoyed. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We've already covered Veris Residential's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Veris Residential's TSR of was a loss of 42% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
The total return of 19% received by Veris Residential shareholders over the last year isn't far from the market return of -17%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 7% per year over the last five years. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. 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 instance, we've identified 2 warning signs for Veris Residential that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.