While not a mind-blowing move, it is good to see that the Tourism Holdings Limited (NZSE:THL) share price has gained 24% in the last three months. But over the last three years we’ve seen a quite serious decline. Regrettably, the share price slid 59% in that period. So it is really good to see an improvement. Perhaps the company has turned over a new leaf.
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. 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.
Tourism Holdings saw its EPS decline at a compound rate of 8.3% per year, over the last three years. The share price decline of 26% is actually steeper than the EPS slippage. So it’s likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 10.38.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Tourism Holdings’ key metrics by checking this interactive graph of Tourism Holdings’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We’ve already covered Tourism Holdings’ share price action, but we should also mention its 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. Dividends have been really beneficial for Tourism Holdings shareholders, and that cash payout explains why its total shareholder loss of 52%, over the last 3 years, isn’t as bad as the share price return.
A Different Perspective
Tourism Holdings shareholders are down 45% for the year, but the market itself is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5.2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 Tourism Holdings (including 1 which is is potentially serious) .
Of course Tourism Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ exchanges.
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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. 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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