For many people, the primary objective of investing is to generate returns above the overall market. However, every investor is almost certain to hold both stocks that outperform and underperform expectations. So we wouldn't blame long-term KKR Real Estate Finance Trust Inc. (NYSE:KREF) shareholders for questioning their decision to hold the stock when the stock price is down 52% in five years. And it's down 24% in about a quarter. That's not much fun for holders.
Now let's take a look at whether the company's long term performance is in line with the progress of its underlying business.
Check out our latest analysis for KKR Real Estate Finance Trust
While markets are a powerful pricing mechanism, share price reflects investor sentiment as well as underlying business performance. One imperfect but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over the past five years, KKR Real Estate Finance Trust's share price has fallen as its EPS has fallen below zero. It's hard to make a valid comparison between EPS and the share price at this point, but we would expect the share price to fall in this scenario.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Earnings per Share Growth
We're pleased to see that there has been significant insider buying in the last three months, which is good to see. That said, we believe earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close look at historic growth trends, which you can find here.
What about dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, as well as dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for dividend paying stocks. In the case of KKR Real Estate Finance Trust, the TSR for the past 5 years is -20%, which is greater than the share price return mentioned above. Therefore, the dividends paid by the company are boosting its total shareholder return.
A different perspective
Investors in KKR Real Estate Finance Trust have had a tough year this year, losing 5.9% in total (including dividends) while the market rose about 25%. Even the share prices of blue chip stocks fall from time to time, but we want to see improvements in the fundamental metrics of a business before getting too interested. Unfortunately, last year's performance capped a bad run, with shareholders facing a total loss of 4% per year over five years. Generally speaking, a long-term share price weakness is a bad sign, but contrarian investors might want to research the stock in hopes of a recovery. While it's well worth considering the different impacts that market conditions can have on share prices, there are other factors that are even more important. Nevertheless, KKR Real Estate Finance Trust is showing 2 warning signs in our investment analysis , and 1 of them is of concern…
The story continues
If you like buying stocks alongside management, then you might just love this free list of companies (hint: insiders are buying).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.