The easiest way to invest in stocks is to buy exchange traded funds. But you can dramatically increase your returns by choosing above-average stocks. For example, the Apollo Commercial Real Estate Finance, Inc. The stock price (NYSE: ARI) has risen 61% over the past year, clearly outpacing the market return by around 34% (excluding dividends). It’s a solid performance by our standards! When you zoom out, the stock is actually down 21% in the last three years.
Let’s take a look at the longer-term underlying fundamentals and see if they’ve been consistent with shareholder returns.
See our latest review for Apollo Commercial Real Estate Finance
To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
Over the past year, Apollo Commercial Real Estate Finance has seen its earnings per share (EPS) increase sharply. This remarkable rate of growth may not be sustainable, but it remains impressive. We therefore expect the share price to rise. For us, inflection points like this are the best time to take a close look at a stock.
The image below shows how EPS has tracked over time (if you click on the image you can see more detail).
We know that Apollo Commercial Real Estate Finance has improved its results lately, but will it increase its income? Check to see if analysts believe Apollo Commercial Real Estate Finance will increase revenue in the future.
What about dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. While the share price return reflects only the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital increase or spin- off updated. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. We note that for Apollo Commercial Real Estate Finance, the TSR over the past year was 81%, which is better than the share price return mentioned above. This is largely the result of his dividend payments!
A different perspective
We are pleased to report that Apollo Commercial Real Estate Finance shareholders received a total shareholder return of 81% over one year. Of course, this includes the dividend. This is better than the 9% annualized return over half a decade, which implies that the company has been doing better recently. Since the stock price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really get an overview, we have to take other information into account as well. However, be aware that Apollo Commercial Real Estate Finance shows 2 warning signs in our investment analysis , you must know…
If you are like me then you not want to miss it free list of growing companies that insiders buy.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the US stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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