Those who invested in PPHE Hotel Group (LON:PPH) five years ago are up 73%

Simply Wall St
·3 min read

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. To wit, the PPHE Hotel Group share price has climbed 64% in five years, easily topping the market decline of 4.2% (ignoring dividends).

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for PPHE Hotel Group

Given that PPHE Hotel Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last half decade PPHE Hotel Group's revenue has actually been trending down at about 18% per year. Even though revenue hasn't increased, the stock actually gained 10%, per year, during the same period. It's probably worth checking other factors such as the profitability, to try to understand the share price action. It may not be reflecting the revenue.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts

What About The Total Shareholder Return (TSR)?

We've already covered PPHE Hotel Group's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. PPHE Hotel Group's TSR of 73% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

PPHE Hotel Group shareholders are down 2.9% over twelve months, which isn't far from the market return of -2.7%. The silver lining is that longer term investors would have made a total return of 12% per year over half a decade. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand PPHE Hotel Group better, we need to consider many other factors. For instance, we've identified 1 warning sign for PPHE Hotel Group that you should be aware of.

We will like PPHE Hotel Group 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 GB exchanges.

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

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.

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