Investors in Wyndham Hotels & Resorts (NYSE: WH) have returned 21% over the past three years
Not the best quarter since Wyndham Hotels & Resorts, Inc. (NYSE: WH) shareholders, as the stock price fell 21% during this period. In contrast, the stock has been on the rise over the past three years. We can say that you would have been better off buying an index fund, because the gain of 16% in three years is not incredible.
Let’s take a look at the longer term underlying fundamentals and see if they have been consistent with shareholder returns.
Check out our latest analysis for Wyndham Hotels & Resorts
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that are too reactive and that investors are not always rational. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
In three years of share price growth, Wyndham Hotels & Resorts has gone from loss to profitability. We therefore expect a rise in the share price over the period.
You can see how EPS has changed over time in the image below (click on the graph to see the exact values).
It’s of course great to see how Wyndham Hotels & Resorts has grown its earnings over the years, but the future is more important to shareholders. This free The Wyndham Hotels & Resorts Balance Sheet Strength Interactive Report is a great place to start if you want to dive deeper into the stock analysis.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, based on the assumption that dividends are reinvested. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. It turns out that Wyndham Hotels & Resorts’ TSR for the last 3 years was 21%, which exceeds the stock price return mentioned earlier. This is largely the result of its dividend payments!
A different perspective
While it’s never nice to take a loss, Wyndham Hotels & Resorts shareholders can take comfort in knowing that, including dividends, their 4.6% year-over-year loss wasn’t nearly as bad. than the market loss of about -19%. Shareholders who have held for three years might be relatively optimistic about the recent weakness, given that they have gained 7% per year for three years. It’s possible that the recent decline in the stock price has more to do with negative returns in the broader market than any company-specific development. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Take for example the ubiquitous specter of investment risk. We have identified 3 warning signs with Wyndham Hotels & Resorts, and understanding them should be part of your investment process.
If you’d rather check out another company – one with potentially superior finances – then don’t miss this free list of companies that have proven that they can increase their profits.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.