Did You Miss Xenia Hotels & Resorts's (NYSE:XHR) 40% Share Price Gain?
Thanks in no small measure to Vanguard founder Jack Bogle, it's easy buy a low cost index fund, which should provide the average market return. But you can make better returns by buying undervalued shares. For example, the Xenia Hotels & Resorts, Inc. (NYSE:XHR) share price is up 40% in the last three years, slightly above the market return. In contrast, the stock is actually down 4.5% in the last year, suggesting a lack of positive momentum.
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Check out our latest analysis for Xenia Hotels & Resorts
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.
During three years of share price growth, Xenia Hotels & Resorts achieved compound earnings per share growth of 18% per year. The average annual share price increase of 12% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Xenia Hotels & Resorts's key metrics by checking this interactive graph of Xenia Hotels & Resorts'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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Xenia Hotels & Resorts the TSR over the last 3 years was 66%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Xenia Hotels & Resorts produced a TSR of 0.6% over the last year. While you don't go broke making a profit, this return was actually lower than the average market return of about 3.5%. But the (superior) three-year TSR of 18% per year is some consolation. We prefer focus on longer term returns, as they are usually a more meaningful indication of the underlying business. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
