The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. Long term Independence Realty Trust, Inc. (NYSE:IRT) shareholders would be well aware of this, since the stock is up 107% in five years. The last week saw the share price soften some 5.0%.
Since the long term performance has been good but there’s been a recent pullback of 5.0%, let’s check if the fundamentals match the share price.
Check out our latest analysis for Independence Realty Trust
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last half decade, Independence Realty Trust became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Independence Realty Trust share price has gained 53% in three years. Meanwhile, EPS is up 5.5% per year. Notably, the EPS growth has been slower than the annualised share price gain of 15% over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
NYSE:IRT Earnings Per Share Growth August 21st 2022
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Independence Realty Trust’s earnings, revenue and cash flow.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Independence Realty Trust the TSR over the last 5 years was 165%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It’s nice to see that Independence Realty Trust shareholders have received a total shareholder return of 6.1% over the last year. That’s including the dividend. However, that falls short of the 22% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It’s always interesting to track share price performance over the longer term. But to understand Independence Realty Trust better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 5 warning signs for Independence Realty Trust (of which 3 are a bit concerning!) you should know about.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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.
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