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Sunstone Hotel Investors (NYSE:SHO) shareholders have earned a 54% return over the last year

·2-min read

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. To wit, the Sunstone Hotel Investors, Inc. (NYSE:SHO) share price is 54% higher than it was a year ago, much better than the market return of around 33% (not including dividends) in the same period. 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 14% lower than it was three years ago.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Sunstone Hotel Investors

Sunstone Hotel Investors wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Sunstone Hotel Investors actually shrunk its revenue over the last year, with a reduction of 69%. Despite the lack of revenue growth, the stock has returned a solid 54% the last twelve months. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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. This free report showing analyst forecasts should help you form a view on Sunstone Hotel Investors

A Different Perspective

It's nice to see that Sunstone Hotel Investors shareholders have received a total shareholder return of 54% over the last year. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before spending more time on Sunstone Hotel Investors it might be wise to click here to see if insiders have been buying or selling shares.

Of course Sunstone Hotel Investors 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 US exchanges.

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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