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It's understandable if you feel frustrated when a stock you own sees a lower share price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. So while the Wharf Real Estate Investment Company Limited (HKG:1997) share price is down 11% in the last year, the total return to shareholders (which includes dividends) was -7.9%. And that total return actually beats the market return of -14%. Wharf Real Estate Investment hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Even worse, it's down 11% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 9.3% in the same time period.
See our latest analysis for Wharf Real Estate Investment
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Even though the Wharf Real Estate Investment share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth. By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But looking to other metrics might better explain the share price change.
On the other hand, we're certainly perturbed by the 21% decline in Wharf Real Estate Investment's revenue. If the market sees the weak revenue as jeopardising EPS, that could explain the lower share price.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Wharf Real Estate Investment is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Wharf Real Estate Investment stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Wharf Real Estate Investment, it has a TSR of -7.9% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!