Investors in Sunstone Hotel Investors (NYSE:SHO) have unfortunately lost 4.7% over the last five years
For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Sunstone Hotel Investors, Inc. (NYSE:SHO), since the last five years saw the share price fall 18%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Sunstone Hotel Investors
We don't think that Sunstone Hotel Investors' modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over half a decade Sunstone Hotel Investors reduced its trailing twelve month revenue by 23% for each year. That's definitely a weaker result than most pre-profit companies report. It seems pretty reasonable to us that the share price dipped 3% per year in that time. We doubt many shareholders are delighted with this share price performance. Risk averse investors probably wouldn't like this one much.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. This free report showing analyst forecasts should help you form a view on Sunstone Hotel Investors
What about the Total Shareholder Return (TSR)?
We've already covered Sunstone Hotel Investors' 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. Sunstone Hotel Investors' TSR of was a loss of 4.7% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Although it hurts that Sunstone Hotel Investors returned a loss of 3.6% in the last twelve months, the broader market was actually worse, returning a loss of 4.6%. Given the total loss of 0.9% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Sunstone Hotel Investors that you should be aware of before investing here.
Sunstone Hotel Investors 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.
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.
