Sunstone Hotel Investors, Inc. (NYSE:SHO) shareholders should be happy to see the share price up 15% in the last month. But that doesn’t change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 31% at that time, significantly under-performing the market.
While the stock has risen 6.4% in the past week but long term shareholders are still in the red, let’s see what the fundamentals can tell us.
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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Sunstone Hotel Investors became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
It could be that the revenue decline of 24% per year is seen as evidence that Sunstone Hotel Investors is shrinking. That could explain the weak share price.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Sunstone Hotel Investors stock, you should check this out free report showing analyst profit forecasts.
What About The Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Sunstone Hotel Investors’ total shareholder return (TSR) and its share price return. 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 has been offered to shareholders. Its history of dividend payouts mean that Sunstone Hotel Investors’ TSR, which was a 20% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Although it hurts that Sunstone Hotel Investors returned a loss of 1.8% in the last twelve months, the broader market was actually worse, returning a loss of 11%. Of far more concern is the 4% pa loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. It’s always interesting to track share price performance over the longer term. But to understand Sunstone Hotel Investors better, we need to consider many other factors. For example, we’ve discovered 1 warning sign for Sunstone Hotel Investors that you should be aware of before investing here.
Sunstone Hotel Investors is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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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 into account 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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