Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by SmartCentres Real Estate Investment Trust (TSE:SRU.UN) shareholders over the last year, as the share price declined 11%. That's well below the market decline of 3.2%. Even if shareholders bought some time ago, they wouldn't be particularly happy: the stock is down 10% in three years. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 9.3%. But this could be related to good market conditions, with stocks up around 7.5% during the period.

Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for SmartCentres Real Estate Investment 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...' 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 unfortunate twelve months during which the SmartCentres Real Estate Investment Trust share price fell, it actually saw its earnings per share (EPS) improve by 324%. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

We don't see any weakness in the SmartCentres Real Estate Investment Trust's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for SmartCentres Real Estate Investment Trust in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 SmartCentres Real Estate Investment Trust the TSR over the last 1 year was -5.7%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that SmartCentres Real Estate Investment Trust shareholders are down 5.7% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.2%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 2 warning signs for SmartCentres Real Estate Investment Trust you should be aware of, and 1 of them is a bit concerning.

SmartCentres Real Estate Investment Trust is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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