We think intelligent long term investing is the way to go. But that doesn’t mean long term investors can avoid big losses. Zooming in on an example, the Braemar Hotels & Resorts Inc. (NYSE:BHR) share price dropped 59% in the last half decade. That is extremely sub-optimal, to say the least. Unfortunately the share price momentum is still quite negative, with prices down 20% in thirty days. But this could be related to poor market conditions — stocks are down 12% in the same time.
So let’s have a look and see if the longer term performance of the company has been in line with the underlying business‘ progress.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Braemar Hotels & Resorts became profitable within the last five years. Most would consider that to be a good thing, so it’s counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
The modest 0.9% dividend yield is unlikely to be guiding the market view of the stock. The revenue fall of 1.1% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.
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 Braemar Hotels & Resorts has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Braemar Hotels & Resorts, it has a TSR of -51% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While it’s never nice to take a loss, Braemar Hotels & Resorts shareholders can take comfort that , including dividends,their trailing twelve month loss of 11% wasn’t as bad as the market loss of around 22%. Of far more concern is the 9% p.a. loss served to shareholders over the last five years. This sort of share price action isn’t particularly encouraging, but at least the losses are slowing. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Braemar Hotels & Resorts (of which 2 are potentially serious!) you should know about.
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.
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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