If you want to increase your wealth in the stock market, you can do so by purchasing an index fund. But investors can improve returns by choosing market-leading companies to own stocks. For example, Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) share price has risen 54% over the past year, clearly outperforming market returns of around 39% (excluding dividends). So the shareholders should smile. When zooming out, the butt is actually down 15% over the past three years.
According to Buffett, “Ships will sail around the world, but the Flat Earth Society will flourish. There will still be large price versus value divergences in the market … ”By comparing earnings per share (EPS) and share price changes over time, we can sense how investors’ attitudes towards the company have changed over time.
Apollo Commercial Real Estate Finance posted truly impressive earnings per share growth in the past year. While this growth rate is unlikely to be sustained for a long time, it remains impressive. Therefore, we are not surprised to see the share price rise. For us, these inflection points are the best time to take a close look at the action.
The image below shows how EPS has been tracked over time (if you click on the image, you will see more details).
We know that Apollo Commercial Real Estate Finance has improved its bottom line lately, but is it going to increase its bottom line? If you are interested you can check this is free report showing consistent revenue projections…
What about dividends?
When considering the return on investment, it is important to consider the difference between total shareholder income (TSR) and stock returns… While the share price yield only reflects the change in the share price, the TSR includes the cost of dividends (assuming they have been reinvested) and the benefit of any discounted capital raising or spin-off. Perhaps TSR provides a more complete picture of stock performance. As for Apollo Commercial Real Estate Finance, its TSR for the last year is 75%. This exceeds the return on his stock we mentioned earlier. And there’s nothing wrong with guessing that dividend payouts do a lot to explain the discrepancy!
It is great to see that the shareholders of Apollo Commercial Real Estate Finance have achieved a total shareholder return of 75% over the past year. And that includes dividends. This is better than the 11% annual return in half a decade, implying that the company has been doing better lately. Someone optimistically might view the recent improvement in TSR as an indication that the business itself is getting better over time. While it is worth considering the different effects of market conditions on the stock price, there are other factors that are even more important. Consider, for example, the ubiquitous spectrum of investment risk. We found 3 warning signs with Apollo Commercial Real Estate Finance (at least 2, which is inconvenient for us) and understanding them should be part of your investment process.
If you enjoy buying shares with management, you may just love it. is free list of companies. (Hint: Insiders bought them.)
Please note that the market returns quoted in this article reflects the weighted average market returns for stocks that are currently listed on US exchanges.
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