Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the TPG RE Finance Trust, Inc. (NYSE:TRTX) share price is down 55% in the last year. That contrasts poorly with the market return of 15%. To make matters worse, the returns over three years have also been really disappointing (the share price is 54% lower than three years ago). The good news is that the stock is up 1.8% in the last week.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
TPG RE Finance Trust fell to a loss making position during the year. While this may prove temporary, we’d consider it a negative, so it doesn’t surprise us that the stock price is down. We hope for shareholders’ sake that the company becomes profitable again soon.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of TPG RE Finance Trust’s earnings, revenue and cash flow.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of TPG RE Finance Trust, it has a TSR of -50% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Over the last year, TPG RE Finance Trust shareholders took a loss of 50%, including dividends. In contrast the market gained about 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 12% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to “buy when there’s blood in the streets, even if the blood is your own”, he also focusses on high quality stocks with solid prospects. 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. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for TPG RE Finance Trust (of which 1 is significant!) you should know about.
TPG RE Finance Trust 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. 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.