T
he pursuit of outperforming market index funds through individual stock selection is a high-risk endeavor, as it often leads to investing in underwhelming companies. Novavest Real Estate AG (VTX:NREN) exemplifies this risk, with its share price plummeting 20% over the past three years, significantly lagging behind the market's decline of approximately 3.9%. To better understand the company's performance, let's examine its underlying fundamentals and see if they align with returns.

    The concept that "price is what you pay for something, but value is what gets you paid" resonates in the world of finance. One way to gauge market sentiment over time is by analyzing the relationship between a company's share price and earnings per share (EPS). Novavest Real Estate's transition from loss to profitability within five years of share price growth would typically be viewed as a positive development, yet its share price has still declined. This discrepancy warrants further investigation.

    A closer look at revenue reveals a 7.3% annual growth rate over the past three years, suggesting that revenue is not a reason for concern. It's possible that there may be an opportunity hidden beneath the surface of this analysis. The graphic below illustrates how earnings and revenue have evolved over time (click on the image to unveil the exact values).

    Notably, the CEO's compensation is lower than the median at similar-sized companies. However, the crucial question remains: can Novavest Real Estate sustainably grow its earnings going forward? This free report provides analyst forecasts that can help you form a view on the company.

    When evaluating investment returns, it's essential to distinguish between total shareholder return (TSR) and share price return. The TSR takes into account the value of cash dividends and any discounted capital raisings or spin-offs, often resulting in a higher return for companies with generous dividend payouts. In Novavest Real Estate's case, its TSR of -11% over the past three years exceeds its share price return, indicating that the company's dividends have contributed to a relatively better total shareholder return.