Stock Analysis

Did You Participate In Any Of Hotel Property Investments' (ASX:HPI) Respectable 80% Return?

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ASX:HPI
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If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. But Hotel Property Investments (ASX:HPI) has fallen short of that second goal, with a share price rise of 26% over five years, which is below the market return. However, if you include the dividends then the return is market beating. Unfortunately the share price is down 2.2% in the last year.

View our latest analysis for Hotel Property Investments

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Hotel Property Investments achieved compound earnings per share (EPS) growth of 1.8% per year. This EPS growth is lower than the 5% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
ASX:HPI Earnings Per Share Growth November 30th 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Hotel Property Investments' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Hotel Property Investments, it has a TSR of 80% for the last 5 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

We're pleased to report that Hotel Property Investments shareholders have received a total shareholder return of 4.4% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 12% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Case in point: We've spotted 4 warning signs for Hotel Property Investments you should be aware of, and 1 of them is potentially serious.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

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