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Did Changing Sentiment Drive Pebblebrook Hotel Trust's (NYSE:PEB) Share Price Down By 27%?

Simply Wall St

For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Pebblebrook Hotel Trust (NYSE:PEB), since the last five years saw the share price fall 27%. And it's not just long term holders hurting, because the stock is down 27% in the last year. Furthermore, it's down 14% in about a quarter. That's not much fun for holders.

See our latest analysis for Pebblebrook Hotel Trust

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over five years Pebblebrook Hotel Trust's earnings per share dropped significantly, falling to a loss, with the share price also lower. The recent extraordinary items contributed to this situation. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.

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

NYSE:PEB Past and Future Earnings, August 9th 2019

Dive deeper into Pebblebrook Hotel Trust's key metrics by checking this interactive graph of Pebblebrook Hotel Trust's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Pebblebrook Hotel Trust's TSR for the last 5 years was -9.9%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 3.3% in the last year, Pebblebrook Hotel Trust shareholders lost 23% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2.1% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you would like to research Pebblebrook Hotel Trust in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.