Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Pebblebrook Hotel Trust (NYSE:PEB) shareholders, since the share price is down 33% in the last three years, falling well short of the market return of around 68%. The last week also saw the share price slip down another 6.7%. But this could be related to the soft market, which is down about 4.6% in the same period.
If the past week is anything to go by, investor sentiment for Pebblebrook Hotel Trust isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
View our latest analysis for Pebblebrook Hotel Trust
Pebblebrook Hotel Trust wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years, Pebblebrook Hotel Trust's revenue dropped 26% per year. That's definitely a weaker result than most pre-profit companies report. With revenue in decline, the share price decline of 10% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Pebblebrook Hotel Trust is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Pebblebrook Hotel Trust's TSR for the last 3 years was -29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!