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Should Park Hotels & Resorts (NYSE:PK) Be Disappointed With Their 10% Profit?

Simply Wall St

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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. To wit, the Park Hotels & Resorts Inc. (NYSE:PK) share price is 10% higher than it was a year ago, much better than the market return of around 8.5% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Park Hotels & Resorts hasn't been listed for long, so it's still not clear if it is a long term winner.

Check out our latest analysis for Park Hotels & Resorts

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over the last twelve months, Park Hotels & Resorts actually shrank its EPS by 81%. So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Absent any improvement, we don't think a thirst for dividends is pushing up the Park Hotels & Resorts's share price. Revenue actually dropped 3.6% over last year. It's fair to say we're a little surprised to see the share price up, and that makes us cautious.

Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.

NYSE:PK Income Statement, May 6th 2019

Park Hotels & Resorts is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Park Hotels & Resorts in this interactive graph of future profit estimates.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Park Hotels & Resorts the TSR over the last year was 21%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Park Hotels & Resorts boasts a total shareholder return of 21% for the last year(that includes the dividends). A substantial portion of that gain has come in the last three months, with the stock up 8.9% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. If you would like to research Park Hotels & Resorts in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

Of course Park Hotels & Resorts may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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