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It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the GreenTree Hospitality Group Ltd. (NYSE:GHG) share price slid 29% over twelve months. That's well below the market return of 39%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 13% in three years. In the last ninety days we've seen the share price slide 37%.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 GreenTree Hospitality Group share price fell, it actually saw its earnings per share (EPS) improve by 15%. It could be that the share price was previously over-hyped.
It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.
Revenue was pretty flat on last year, which isn't too bad. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that GreenTree Hospitality Group has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts
A Different Perspective
GreenTree Hospitality Group shareholders are down 29% for the year, (even including dividends), but the broader market is up 39%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 3.1% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Even so, be aware that GreenTree Hospitality Group is showing 2 warning signs in our investment analysis , you should know about...
Of course GreenTree Hospitality Group 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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