Many investors define successful investing as outperforming the market average over the long term. However, if you dabble in stock selection, there is a risk that you will fall short of the market return. Unfortunately, this is also true for long-term Starwood Property Trust, Inc. ( NYSE:STWD ) shareholders, with the stock price down 21% over the past three years, well below the market return of around 22%. .
With that in mind, it’s worth checking whether a company’s underlying fundamentals are driving its long-term performance, or if there are any discrepancies.
Check out our latest analysis for Starwood Property Trust.
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that overreact and that investors are not always rational. One imperfect but simple way to consider how the market perception of a company has changed is to compare the change in the earnings per share (EPS) with the share price movement.
Starwood Property Trust has seen its EPS decline at an average rate of 15% per year over the last three years. This EPS decline is more severe than the compounded 8% annual share price decline. So despite the previous disappointment, shareholders should have some confidence that things will improve in the long term.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
NYSE:STWD Earnings per Share Growth October 21, 2024
Dive deeper into Starwood Property Trust’s key metrics by checking out this interactive graph of Starwood Property Trust’s earnings, revenue and cash flow.
What will happen to the dividend?
As well as measuring share price return, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return delivered by a stock. For Starwood Property Trust, the TSR for the last three years was 4.6%. This exceeds the stock return mentioned earlier. Therefore, the dividends paid by the company boosted the total return for shareholders.
different perspective
Starwood Property Trust offered a TSR of 25% in the last 12 months. However, this was below the market average. The silver lining is that this return was actually better than the five-year average annual return of 6%. As the fundamentals of your business improve, so too can your profits. It’s always interesting to track stock performance over the long term. But to understand Starwood Property Trust better, you need to consider many other factors. For example, we’ve discovered 5 warning signs for Starwood Property Trust (2 aren’t great!) that you should be aware of before investing here.
If you’re like me, you won’t want to miss this free list of undervalued small-cap stocks that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
