Travel + Leisure's (NYSE:TNL) one-year earnings growth trails the 38% YoY shareholder returns

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Travel + Leisure Co. (NYSE:TNL) share price is up 32% in the last 1 year, clearly besting the market return of around 24% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 2.6% lower than it was three years ago.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Travel + Leisure

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last year Travel + Leisure grew its earnings per share (EPS) by 19%. This EPS growth is significantly lower than the 32% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

It is of course excellent to see how Travel + Leisure has grown profits over the years, but the future is more important for shareholders. This free interactive report on Travel + Leisure's balance sheet strength is a great place to start, if you want to investigate the stock further.

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 Travel + Leisure the TSR over the last 1 year was 38%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Travel + Leisure shareholders have received a total shareholder return of 38% over one year. Of course, that includes the dividend. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Travel + Leisure (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Of course Travel + Leisure may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.