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The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the Hilton Grand Vacations Inc. (NYSE:HGV) share price is up 99% in the last year, clearly besting the market return of around 39% (not including dividends). That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 18% higher than it was three years ago.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 last year Hilton Grand Vacations saw its earnings per share (EPS) drop below zero. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. It may be that the company has done well on other metrics.
Hilton Grand Vacations' revenue actually dropped 58% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Hilton Grand Vacations' financial health with this free report on its balance sheet.
A Different Perspective
It's nice to see that Hilton Grand Vacations shareholders have gained 99% (in total) over the last year. That gain actually surpasses the 6% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Hilton Grand Vacations on your watchlist. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Hilton Grand Vacations has 2 warning signs (and 1 which is significant) we think you should know about.
Of course Hilton Grand Vacations may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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