It hasn't been the best quarter for Huazhu Group Limited (NASDAQ:HTHT) shareholders, since the share price has fallen 25% in that time. But over five years returns have been remarkably great. In that time, the share price has soared some 371% higher! So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term.
Huazhu Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 5 years Huazhu Group saw its revenue grow at 12% per year. That's a pretty good long term growth rate. Arguably it's more than reflected in the very strong share price gain of 36% a year over a half a decade. It might not be cheap but a (long-term) growth stock like this is usually well worth taking a closer look at.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Huazhu Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
What about the Total Shareholder Return (TSR)?
We've already covered Huazhu Group's 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. Its history of dividend payouts mean that Huazhu Group's TSR of 382% over the last 5 years is better than the share price return.
A Different Perspective
Huazhu Group shareholders gained a total return of 26% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 37% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Huazhu Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Huazhu Group (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
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.
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