Investors in Office Properties Income Trust (NASDAQ: OPI) are sitting on a 50% loss if they invested five years ago
For many, the primary goal of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than make up for the losers So we wouldn’t blame the long run Income trust for office buildings (NASDAQ: OPI) for doubting their decision to hold, the stock having fallen 68% in half a decade.
Now let’s take a look at the fundamentals of the business and see if the long-term return to shareholders matches the performance of the underlying business.
Office Properties Income Trust is currently unprofitable, so most analysts would look to revenue growth to get a feel for how fast the underlying business is growing. Generally speaking, companies with no profits are expected to increase their income every year, and at a good rate. This is because it is difficult to be sure that a business will be sustainable if the revenue growth is negligible and it never makes a profit.
Over the past five years, Office Properties Income Trust has seen its revenues increase by 21% per year. It’s better than most loss-making businesses. Unfortunately for shareholders, the share price has fallen 11% per year – disappointing given the growth. It is safe to say that investors’ expectations are more justified now. If you think the business can keep its revenue growing, you should consider the possibility that there is an opportunity here.
The company’s revenue and profits (over time) are shown in the image below (click to see exact numbers).
NasdaqGS: OPI Profits and Revenue Growth October 6, 2021
The strength of the balance sheet is crucial. It might be worth taking a look at our free report on changes in their financial situation over time.
What about dividends?
In addition to measuring stock price performance, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. As it turns out, Office Properties Income Trust’s TSR over the past 5 years was -50%, which exceeds the share price return mentioned earlier. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
Office Properties Income Trust provided a 33% TSR for the year (including dividends). It’s pretty close to the overall market return. The bright side is that the stock price is rising in the short term, which runs counter to the 8% annualized loss over the past five years. While “turnarounds rarely turn around,” there are green shoots for Office Properties Income Trust. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really understand better, we have to take other information into account as well. Even so, be aware that Office Properties Income Trust shows 2 warning signs in our investment analysis , you must know…
We will prefer Office Properties Income Trust if we see large insider buying. In the meantime, watch this free list of growing companies with significant and recent insider buying.
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.
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 any of the stocks mentioned.
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.