Yahoo Finance The total return for Marriott Vacations Worldwide (NYSE:VAC) investors has risen faster than earnings growth over the last three years
Marriott Vacations Worldwide Corporation (NYSE:VAC) shareholders have seen the share price descend 18% over the month. But that doesn't change the fact that the returns over the last three years have been very strong. In fact, the share price is up a full 225% compared to three years ago. So the recent fall in the share price should be viewed in that context. The thing to consider is whether the underlying business is doing well enough to support the current price.
Since the long term performance has been good but there's been a recent pullback of 9.3%, let's check if the fundamentals match the share price.
Check out our latest analysis for Marriott Vacations Worldwide
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Marriott Vacations Worldwide was able to grow its EPS at 50% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 48% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Quite to the contrary, the share price has arguably reflected the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Marriott Vacations Worldwide has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Marriott Vacations Worldwide's financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Marriott Vacations Worldwide, it has a TSR of 235% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
The total return of 13% received by Marriott Vacations Worldwide shareholders over the last year isn't far from the market return of -12%. Longer term investors wouldn't be so upset, since they would have made 1.1%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand Marriott Vacations Worldwide better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Marriott Vacations Worldwide you should be aware of, and 1 of them is significant.
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 American 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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