Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Simon Property Group, Inc. (NYSE:SPG) share price has soared 104% in the last 1 year. Most would be very happy with that, especially in just one year! And in the last week the share price has popped 3.6%. But this could be related to the buoyant market which is up about 2.0% in a week. Zooming out, the stock is actually down 24% in the last three years.
Since it's been a strong week for Simon Property Group shareholders, let's have a look at trend of the longer term fundamentals.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year, Simon Property Group actually saw its earnings per share drop 19%.
So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
Absent any improvement, we don't think a thirst for dividends is pushing up the Simon Property Group's share price. It saw it's revenue decline by 12% over twelve months. Usually that correlates with a lower share price, but let's face it, the gyrations of the market are sometimes only as clear as mud.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Simon Property Group, it has a TSR of 118% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Simon Property Group shareholders have received a total shareholder return of 118% over one year. That's including the dividend. That certainly beats the loss of about 3% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Simon Property Group (of which 1 makes us a bit uncomfortable!) you should know about.
Simon Property Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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