Investors in Hilton Worldwide Holdings (NYSE:HLT) have made a strong return of 144% over the past five years
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 instance, the price of Hilton Worldwide Holdings Inc. (NYSE:HLT) stock is up an impressive 139% over the last five years. It's down 1.8% in the last seven days.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Hilton Worldwide Holdings
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the five years of share price growth, Hilton Worldwide Holdings moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Hilton Worldwide Holdings share price is up 65% in the last three years. In the same period, EPS is up 0.7% per year. This EPS growth is lower than the 18% average annual increase in the share price over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Hilton Worldwide Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered Hilton Worldwide Holdings' 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 Hilton Worldwide Holdings shareholders, and that cash payout contributed to why its TSR of 144%, over the last 5 years, is better than the share price return.
A Different Perspective
We're pleased to report that Hilton Worldwide Holdings shareholders have received a total shareholder return of 16% over one year. Having said that, the five-year TSR of 20% a year, is even better. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Hilton Worldwide Holdings (of which 1 makes us a bit uncomfortable!) you should know about.
Hilton Worldwide Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.
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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.
