It's easy to feel disappointed if you buy a stock that goes down. But often it is not a reflection of the fundamental business performance. The InterContinental Hotels Group PLC (LON:IHG) is down 11% over a year, but the total shareholder return is -9.4% once you include the dividend. And that total return actually beats the market decline of 11%. Taking the longer term view, the stock fell 9.7% over the last three years.
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.
Though if you're not interested in researching what drove IHG's performance, we have a free list of interesting investing ideas to potentially inspire your next investment!
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
InterContinental Hotels Group managed to increase earnings per share from a loss to a profit, over the last 12 months.
Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. But we may find different metrics more enlightening.
With a low yield of 1.7% we doubt that the dividend influences the share price much. InterContinental Hotels Group managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
InterContinental Hotels Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think InterContinental Hotels Group will earn in the future (free analyst consensus estimates)
A Different Perspective
Although it hurts that InterContinental Hotels Group returned a loss of 9.4% in the last twelve months, the broader market was actually worse, returning a loss of 11%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 2% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Case in point: We've spotted 2 warning signs for InterContinental Hotels Group you should be aware of.
We will like InterContinental Hotels Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
Valuation is complex, but we're helping make it simple.
Find out whether InterContinental Hotels Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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.
InterContinental Hotels Group
InterContinental Hotels Group PLC owns, manages, franchises, and leases hotels in the Americas, Europe, Asia, the Middle East, Africa, and Greater China.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
|Analysis Area||Score (0-6)|
Read more about these checks in the individual report sections or in our analysis model.
Fair value with moderate growth potential.