Yahoo Finance Travel + Leisure (NYSE:TNL) investors are up 3.4% in the past week, but earnings have declined over the last three years
By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Travel + Leisure Co. (NYSE:TNL), which is up 76%, over three years, soundly beating the market return of 44% (not including dividends).
Since it's been a strong week for Travel + Leisure shareholders, let's have a look at trend of the longer term fundamentals.
View our latest analysis for Travel + Leisure
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years of share price growth, Travel + Leisure actually saw its earnings per share (EPS) drop 4.3% per year.
Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Travel + Leisure at the moment. Therefore, it makes sense to look into other metrics.
We doubt the dividend payments explain the share price rise, since we don't see any improvement in that regard. Given the modest revenue growth, we doubt it explains the share price rise. But a closer look at the numbers might enlighten.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Travel + Leisure has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Travel + Leisure will earn in the future (free profit forecasts).
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Travel + Leisure the TSR over the last 3 years was 95%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Travel + Leisure shareholders are down 24% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 6.1%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. To that end, you should learn about the 3 warning signs we've spotted with Travel + Leisure (including 1 which is significant) .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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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