Shareholders Of Ares Commercial Real Estate (NYSE:ACRE) Must Be Happy With Their 114% Total Return
The easiest way to invest in stocks is to buy exchange-traded funds. But if you pick the right individual titles, you can do more than that. This means Ares Commercial Real Estate Corporation (NYSE: ACRE) share price is 89% higher than a year ago, much better than the market return of around 43% (excluding dividends) over the same period. If it can sustain that outperformance over the long term, investors will do very well! The longer term returns were not that good. The share price was only 9.0% higher than three years ago.
Check out our latest analysis for Ares Commercial Real Estate
In his essay, The Superinvestors of Graham-and-Doddsville, Warren Buffett described how stock prices do not always rationally reflect the value of a company. An incomplete but easy way to take into account how a company’s market perception has changed is to compare the change in earnings per share (EPS) with price movement.
Last year, Ares Commercial Real Estate increased earnings per share (EPS) by 330%. This EPS growth is significantly higher than the 89% increase in the share price. As a result, the market doesn’t seem to be as excited about Ares Commercial Real Estate as it was before. This could be an opportunity. This cautious sentiment is reflected in its (relatively low) PER of 9.23.
The graphic below shows how the EPS has changed over time (indicate the exact values by clicking on the picture).
NYSE: ACRE earnings per share growth on May 27, 2021
It’s probably worth noting that at companies of similar size, the CEO is paid less than the median. While CEO compensation is always worth reviewing, the really important question is whether the company can grow its profits going forward. These free An interactive report on Ares Commercial Real Estate’s earnings, earnings, and cash flow is a great place to start if you want to explore the stock further.
What about dividends?
It’s important to consider total shareholder return as well as the share price return for a given stock. The TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividend received has been reinvested) and the calculated value of discounted capital increases and carve-outs. It’s fair to say that the TSR paints a more complete picture for stocks that pay a dividend. At Ares Commercial Real Estate, the TSR is 114% last year. This exceeds the previously mentioned share price return. The dividends paid by the company have thus increased the total return for shareholders.
We are pleased to announce that Ares Commercial Real Estate shareholders have received a total return of 114% in one year. This of course also includes the dividend. With the one-year TSR outperforming the five-year TSR (the latter is 15% per annum), the stock’s performance seems to have been improving lately. Someone with an optimistic outlook might take the recent improvement in TSR as an indication that business itself is getting better with time. While it is worth considering the varying effects of market conditions on the stock price, other factors are even more important. To do this, you should learn something about that 4 warning signs We have seen with Ares Commercial Real Estate (including 2 which cannot be ignored).
But note: Ares Commercial Real Estate may not be the best stock to buy. So take a look at it free List of interesting companies with a history of earnings growth (and further growth forecast).
Please note that the market returns reported in this article reflect the market-weighted average returns on stocks currently traded on US exchanges.
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