Playa Hotels & Resorts (NASDAQ:PLYA) rises 4.6% this week, taking three-year gains to 30%

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Playa Hotels & Resorts N.V. (NASDAQ:PLYA) shareholders have seen the share price rise 30% over three years, well in excess of the market return (20%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.5% in the last year.

The past week has proven to be lucrative for Playa Hotels & Resorts investors, so let's see if fundamentals drove the company's three-year performance.

View our latest analysis for Playa Hotels & Resorts

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.

Playa Hotels & Resorts became profitable within the last three years. So we would expect a higher share price over the period.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how Playa Hotels & Resorts has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Playa Hotels & Resorts shareholders gained a total return of 2.5% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 3% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Playa Hotels & Resorts (of which 1 is significant!) you should know about.

But note: Playa Hotels & Resorts may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com