Buying a low-cost index fund will get you the average market return. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the Hilton Grand Vacations Inc. (NYSE:HGV) share price is up 33% in the last three years, that falls short of the market return. Some buyers are laughing, though, with an increase of 31% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Hilton Grand Vacations achieved compound earnings per share growth of 17% per year. This EPS growth is higher than the 10.0% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 11.93 also reflects the negative sentiment around the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
Hilton Grand Vacations shareholders have gained 31% over twelve months. This isn't far from the market return of 31%. That's not at all bad, but the cherry on top is that it's an improvement on prior returns (since shareholders only made 10.0% yearly over the last three years). It's good to see the uptick, although the business fundamentals will need to move in the right direction if the company is to sustain the rise. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Hilton Grand Vacations by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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. Thank you for reading.