Yahoo Finance The one-year underlying earnings growth at Essential Properties Realty Trust (NYSE:EPRT) is promising, but the shareholders are still in the red over that time
One simple way to benefit from a rising market is to buy an index fund. By comparison, an individual stock is unlikely to match market returns - and could well fall short. For example, that's what happened with Essential Properties Realty Trust, Inc. (NYSE:EPRT) over the last year - it's share price is down 27% versus a market decline of 22%. At least the damage isn't so bad if you look at the last three years, since the stock is down 7.7% in that time. More recently, the share price has dropped a further 11% in a month. We do note, however, that the broader market is down 9.6% in that period, and this may have weighed on the share price.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
See our latest analysis for Essential Properties Realty Trust
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.
During the unfortunate twelve months during which the Essential Properties Realty Trust share price fell, it actually saw its earnings per share (EPS) improve by 79%. Of course, the situation might betray previous over-optimism about growth.
It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.
Essential Properties Realty Trust's dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Essential Properties Realty Trust in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Essential Properties Realty Trust the TSR over the last 1 year was -24%, 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
Essential Properties Realty Trust shareholders are down 24% for the year (even including dividends), falling short of the market return. The market shed around 22%, no doubt weighing on the stock price. Investors are up over three years, booking 1.5% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. It's always interesting to track share price performance over the longer term. But to understand Essential Properties Realty Trust better, we need to consider many other factors. For example, we've discovered 3 warning signs for Essential Properties Realty Trust (1 can't be ignored!) that you should be aware of before investing here.
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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