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For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Franklin BSP Realty Trust, Inc. (NYSE:FBRT) shareholders, since the share price is down 10% in the last three years, falling well short of the market return of around 32%.
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.
See our latest analysis for Franklin BSP 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. 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 three years that the share price fell, Franklin BSP Realty Trust's earnings per share (EPS) dropped by 30% each year. This fall in the EPS is worse than the 4% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Franklin BSP 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Franklin BSP Realty Trust the TSR over the last 3 years was 23%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Franklin BSP Realty Trust shareholders are up 4.1% for the year (even including dividends). While you don't go broke making a profit, this return was actually lower than the average market return of about 29%. At least the longer term returns (running at about 7% a year, are better. We prefer focus on longer term returns, as they are usually a more meaningful indication of the underlying 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. Case in point: We've spotted 2 warning signs for Franklin BSP Realty Trust you should be aware of, and 1 of them is a bit unpleasant.