Yahoo Finance Did Changing Sentiment Drive Hilton Worldwide Holdings' (NYSE:HLT) Share Price Down By 26%?
It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Hilton Worldwide Holdings Inc. (NYSE:HLT) share price slid 26% over twelve months. That falls noticeably short of the market decline of around 1.4%. The silver lining (for longer term investors) is that the stock is still 7.3% higher than it was three years ago. The share price has dropped 39% in three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
See our latest analysis for Hilton Worldwide Holdings
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 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 unfortunate twelve months during which the Hilton Worldwide Holdings share price fell, it actually saw its earnings per share (EPS) improve by 1.9%. It's quite possible that growth expectations may have been unreasonable in the past.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But looking to other metrics might better explain the share price change.
In contrast, the 3.7% drop in revenue is a real concern. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Hilton Worldwide Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Hilton Worldwide Holdings's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Hilton Worldwide Holdings shareholders, and that cash payout explains why its total shareholder loss of 26%, over the last year, isn't as bad as the share price return.
A Different Perspective
Investors in Hilton Worldwide Holdings had a tough year, with a total loss of 26%, against a market gain of about 1.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 3.5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Hilton Worldwide Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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. 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. Thank you for reading.
