For many, the main point of investing is to generate higher returns than the overall market. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Sotherly Hotels Inc. (NASDAQ:SOHO), since the last five years saw the share price fall 16%. Unhappily, the share price slid 1.6% in the last week.
Given that Sotherly Hotels didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last half decade, Sotherly Hotels saw its revenue increase by 8.9% per year. That's a fairly respectable growth rate. Shareholders have seen the share price fall at 3.3% per year, for five years: a poor performance. Clearly, the expectations from back then have not been satisfied. The lesson is that if you buy shares in a money losing company you could end up losing money.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Sotherly Hotels's TSR for the last 5 years was 14%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Sotherly Hotels had a tough year, with a total loss of 1.8% (including dividends), against a market gain of about 3.8%. 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 2.7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research Sotherly Hotels 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, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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 firstname.lastname@example.org. 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.