Travelzoo's (NASDAQ:TZOO) one-year total shareholder returns outpace the underlying earnings growth

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the Travelzoo (NASDAQ:TZOO) share price is up 50% in the last 1 year, clearly besting the market return of around 20% (not including dividends). So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 40% in three years.

While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Travelzoo

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year Travelzoo grew its earnings per share (EPS) by 48%. This EPS growth is reasonably close to the 50% increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. It makes intuitive sense that the share price and EPS would grow at similar rates.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Travelzoo has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Travelzoo's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Travelzoo shareholders have received a total shareholder return of 50% over the last year. That certainly beats the loss of about 6% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Take risks, for example - Travelzoo has 1 warning sign we think you should be aware of.

We will like Travelzoo 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 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.