Dexus (ASX:DXS) shareholders suffered a 10% loss investing in the stock three years ago

As an investor, it’s worth striving to ensure that your overall portfolio beats the market average. But the risk of stock picking is that you are likely to buy underperforming companies. Unfortunately, this has been the case for longer Dexus (ASX:DXS) shareholders, as the stock price has fallen 22% over the past three years, well below the market return of around 29%.

With that in mind, it’s worth seeing whether the company’s underlying fundamentals have been driving long-term performance, or if there are any gaps.

Check out our latest analysis for Dexus

While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. 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.

Dexus has seen its EPS decline at a compound rate of 0.9% per annum, over the past three years. The 8% share price decline is actually more pronounced than the EPS slide. So it seems that the market was overconfident in the company in the past. This heightened caution is also evident in the rather low P/E ratio, which sits at 7.51.

The graph below illustrates the evolution of EPS over time (reveal the exact values ​​by clicking on the image).

It’s probably worth noting that we’ve seen significant insider buying over the past quarter, which we view as a positive. On the other hand, we believe revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a careful review of historical growth trends, available here.

What about dividends?

It is important to consider the total shareholder return, as well as the stock price return, for a given stock. The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, based on the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. It turns out that Dexus’ TSR for the past 3 years was -10%, which exceeds the share price return mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!

The story continues

A different perspective

It is good to see that Dexus shareholders have received a total shareholder return of 4.0% over the past year. And that includes the dividend. That said, the five-year TSR of 5% per year is even better. It is always interesting to follow the evolution of the share price over the long term. But to better understand Dexus, we need to consider many other factors. For example, we have identified 3 warning signs for Dexus (1 cannot be ignored) which you should be aware of.

If you like buying stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on AU exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.