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Strong week for InterContinental Hotels Group (NYSE:IHG) shareholders doesn't alleviate pain of one-year loss

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It's normal to be annoyed when stock you own has a declining share price. But often it is not a reflection of the fundamental business performance. So while the InterContinental Hotels Group PLC (NYSE:IHG) share price is down 12% in the last year, the total return to shareholders (which includes dividends) was -11%. That's better than the market which declined 14% over the last year. However, the longer term returns haven't been so bad, with the stock down 4.6% in the last three years. In the last ninety days we've seen the share price slide 13%. However, one could argue that the price has been influenced by the general market, which is down 9.6% in the same timeframe.

The recent uptick of 4.8% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

Check out our latest analysis for InterContinental Hotels Group

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year InterContinental Hotels Group grew its earnings per share, moving from a loss to a profit.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action. But we may find different metrics more enlightening.

InterContinental Hotels Group managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on InterContinental Hotels Group

A Different Perspective

While it's certainly disappointing to see that InterContinental Hotels Group shares lost 11% throughout the year, that wasn't as bad as the market loss of 14%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 3% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with InterContinental Hotels Group , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

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.

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