If You Had Bought CDL Hospitality Trusts' (SGX:J85) Shares Three Years Ago You Would Be Down 26%

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term CDL Hospitality Trusts (SGX:J85) shareholders have had that experience, with the share price dropping 26% in three years, versus a market decline of about 7.2%. It's up 3.3% in the last seven days.

Check out our latest analysis for CDL Hospitality Trusts

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.

Over the three years that the share price declined, CDL Hospitality Trusts' earnings per share (EPS) dropped significantly, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for CDL Hospitality Trusts the TSR over the last 3 years was -13%, 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

CDL Hospitality Trusts shareholders are down 2.6% for the year (even including dividends), but the market itself is up 3.5%. 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 6% 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. Even so, be aware that CDL Hospitality Trusts is showing 2 warning signs in our investment analysis , you should know about...

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