CIM Commercial Trust (NASDAQ:CMCT) Shares Have Generated A Total Return Of Negative 43% In The Last Year

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the CIM Commercial Trust Corporation (NASDAQ:CMCT) share price is down 83% in the last year. That falls noticeably short of the market return of around 9.0%. To make matters worse, the returns over three years have also been really disappointing (the share price is 78% lower than three years ago). Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

View our latest analysis for CIM Commercial Trust

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Unfortunately CIM Commercial Trust reported an EPS drop of 90% for the last year. We note that the 83% share price drop is very close to the EPS drop. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on CIM Commercial Trust's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, CIM Commercial Trust's TSR for the last year was -43%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

CIM Commercial Trust shareholders are down 43% for the year (even including dividends) , but the market itself is up 9.0%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.2% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand CIM Commercial Trust better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with CIM Commercial Trust (at least 2 which are concerning) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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. 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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