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Huazhu Group (NASDAQ:HTHT) shareholders notch a 27% CAGR over 5 years, yet earnings have been shrinking

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Huazhu Group Limited (NASDAQ:HTHT) share price has soared 219% in the last half decade. Most would be very happy with that. It's also up 30% in about a month.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Huazhu Group

We don't think that Huazhu Group's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

For the last half decade, Huazhu Group can boast revenue growth at a rate of 11% per year. That's a fairly respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 26% per year over five years. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. Accelerating growth can be a sign of an inflection point - and could indicate profits lie ahead. Worth watching 100%

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

Huazhu Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Huazhu Group stock, you should check out this free report showing analyst consensus estimates for future profits.

What about the Total Shareholder Return (TSR)?

We've already covered Huazhu Group's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Huazhu Group shareholders, and that cash payout contributed to why its TSR of 227%, over the last 5 years, is better than the share price return.

A Different Perspective

Investors in Huazhu Group had a tough year, with a total loss of 28%, against a market gain of about 2.3%. 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. Longer term investors wouldn't be so upset, since they would have made 27%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Huazhu Group better, we need to consider many other factors. Take risks, for example - Huazhu Group has 2 warning signs we think you should be aware of.

We will like Huazhu Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.