U.S. Markets open in 7 mins

Imagine Owning Advani Hotels & Resorts (India) (NSE:ADVANIHOTR) And Wondering If The 17% Share Price Slide Is Justified

Simply Wall St

While it may not be enough for some shareholders, we think it is good to see the Advani Hotels & Resorts (India) Limited (NSE:ADVANIHOTR) share price up 10% in a single quarter. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 17% in that half decade.

View our latest analysis for Advani Hotels & Resorts (India)

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

While the share price declined over five years, Advani Hotels & Resorts (India) actually managed to increase EPS by an average of 26% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.

It's strange to see such muted share price performance despite sustained growth. Perhaps a clue lies in other metrics.

Revenue is actually up 9.1% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NSEI:ADVANIHOTR Income Statement, November 5th 2019

This free interactive report on Advani Hotels & Resorts (India)'s balance sheet strength is a great place to start, if you want to investigate the stock further.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Advani Hotels & Resorts (India) the TSR over the last 5 years was -9.3%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Advani Hotels & Resorts (India) provided a TSR of 3.8% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 1.9% endured over half a decade. So this might be a sign the business has turned its fortunes around. Importantly, we haven't analysed Advani Hotels & Resorts (India)'s dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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