The past year for British Land (LON:BLND) investors has not been profitable

It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by British Land Company PLC (LON:BLND) shareholders over the last year, as the share price declined 22%. That falls noticeably short of the market return of around 14%. Longer term investors have fared much better, since the share price is up 1.8% in three years.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

British Land managed to increase earnings per share from a loss to a profit, over the last 12 months.

Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. So it makes sense to check out some other factors.

We don't see any weakness in the British Land's dividend so the steady payout can't really explain the share price drop. In fact, it seems more likely that the revenue fall of 17% in the last year is the worry. The market may be extrapolating the decline, leading to questions around the sustainability of the EPS.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think British Land will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, British Land's TSR for the last 1 year was -18%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

British Land shareholders are down 18% for the year (even including dividends), but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand British Land better, we need to consider many other factors. Take risks, for example - British Land has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

British Land is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.