One of the frustrations of investing is when a stock goes down. But it can difficult to make money in a declining market. The Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) is down 11% over three years, but the total shareholder return is 34% once you include the dividend. That’s better than the market which returned 25% over the last three years.

It’s worthwhile assessing if the company’s economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let’s do just that.

View our latest analysis for Chicago Atlantic Real Estate Finance

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Chicago Atlantic Real Estate Finance saw its EPS decline at a compound rate of 0.06% per year, over the last three years. This reduction in EPS is slower than the 4% annual reduction in the share price. So it’s likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. The less favorable sentiment is reflected in its current P/E ratio of 7.86.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Chicago Atlantic Real Estate Finance’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Chicago Atlantic Real Estate Finance the TSR over the last 3 years was 34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

Over the last year Chicago Atlantic Real Estate Finance shareholders have received a TSR of 12%. It’s always nice to make money but this return falls short of the market return which was about 26% for the year. On the bright side that gain is actually better than the average return of 10% over the last three years, implying that the company is doing better recently. If the share price is up as a result of improved business performance, then this kind of improvement may be sustained. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Chicago Atlantic Real Estate Finance is showing 2 warning signs in our investment analysis , and 1 of those is concerning…