Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Elegant Hotels Group Plc (LON:EHG) shareholders have had that experience, with the share price dropping 29% in three years, versus a market return of about 33%. The silver lining is that the stock is up 1.4% in about a week.
Check out our latest analysis for Elegant Hotels Group
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During the unfortunate three years of share price decline, Elegant Hotels Group actually saw its earnings per share (EPS) improve by 12% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed. It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
We note that the dividend has declined - a likely contributor to the share price drop. In contrast it does not seem particularly likely that the revenue levels are a concern for investors.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
We know that Elegant Hotels Group has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Elegant Hotels Group the TSR over the last 3 years was -12%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
The last twelve months weren't great for Elegant Hotels Group shares, which performed worse than the market, costing holders 6.1%, including dividends. The market shed around 0.4%, no doubt weighing on the stock price. The three-year loss of 4.2% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Before forming an opinion on Elegant Hotels Group you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.