It might be of some concern to shareholders to see the Travel + Leisure Co. (NYSE:TNL) share price down 24% in the last month. On the bright side the share price is up over the last half decade. In that time, it is up 77%, which isn’t bad, but is below the market return of 95%.
In light of the stock dropping 12% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company’s positive five-year return.
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 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.
During five years of share price growth, Travel + Leisure achieved compound earnings per share (EPS) growth of 1.3% per year. This EPS growth is slower than the share price growth of 12% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that’s hardly shocking given the track record of growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Travel + Leisure’s key metrics by checking this interactive graph of Travel + Leisure’s earnings, revenue and cash flow .
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Travel + Leisure the TSR over the last 5 years was 115%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
We regret to report that Travel + Leisure shareholders are down 8.3% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 2.0%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 17% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Travel + Leisure better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we’ve spotted with Travel + Leisure (including 1 which is a bit unpleasant) .
