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If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Kite Realty Group Trust (NYSE:KRG) share price is 96% higher than it was a year ago, much better than the market return of around 39% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! The longer term returns have not been as good, with the stock price only 29% higher than it was three years ago.
In light of the stock dropping 3.9% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.
Given that Kite Realty Group Trust only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last year Kite Realty Group Trust saw its revenue shrink by 3.9%. The stock is up 96% in that time, a fine performance given the revenue drop. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that Kite Realty Group Trust has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Kite Realty Group Trust, it has a TSR of 103% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that Kite Realty Group Trust has rewarded shareholders with a total shareholder return of 103% in the last twelve months. And that does include the dividend. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Given the share 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 share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Kite Realty Group Trust (of which 2 are significant!) you should know about.
We will like Kite Realty Group Trust better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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