What Type Of Returns Would Ares Commercial Real Estate’s(NYSE:ACRE) Shareholders Have Earned If They Purchased Their SharesYear Ago?
It’s not a great move, but it’s good to see the Ares Commercial Real Estate Corporation The share price (NYSE: ACRE) is up 21% in the past three months. But that doesn’t change the fact that last year’s returns were less than pleasing. In fact, the price has fallen 27% in a year and has not reached the returns you could get by investing in an index fund.
Check out our latest analysis for Ares Commercial Real Estate
There’s no denying that markets are sometimes efficient, but prices don’t always reflect underlying business performance. One way to study how market sentiment has changed over time is to examine the interaction between a company’s share price and earnings per share (EPS).
Unfortunately, Ares Commercial Real Estate had a 59% drop in EPS last year. The 27% drop in price isn’t as bad as the drop in earnings per share. Maybe the weak EPS wasn’t as bad as some feared.
The company’s earnings per share (over time) are shown in the figure below (click for exact numbers).
NYSE: ACRE earnings per share growth January 6, 2021
We think it’s good that insiders have bought stocks in the past twelve months. Even so, future earnings will be far more important whether current shareholders make money. 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 stock price return for a given stock. The TSR takes into account the value of spin-offs or discounted capital increases and any dividends, based on the assumption that the dividends will be reinvested. The TSR arguably gives a more complete picture of a stock’s return. At Ares Commercial Real Estate, the TSR is -17% last year. This exceeds the previously mentioned share price return. And there’s no price to be paid to guessing that the dividend payments largely explain the divergence!
Investors in Ares Commercial Real Estate had a difficult year with an overall loss of 17% (including dividends) versus a market gain of around 24%. Even the stock prices of good stocks fall sometimes, but we want to see improvements in a company’s fundamentals before we get too interested. Long-term investors wouldn’t be so upset as they would have made 10% every year for five years. If the fundamentals continue to point to long-term sustainable growth, the current sell-off could be an opportunity to consider. I find it very interesting to look at the share price as a proxy for business development over the long term. But to really gain insight, we need to consider other information as well. For example, we identified 4 warning signs for Ares Commercial Real Estate (2 concern) that you should be aware of.
There are many other companies that insiders buy stocks from. You probably do Not want to miss that free List of growing companies that insider buy.
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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