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When we invest, we’re generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Hotel Properties Limited (SGX:H15) share price is up 68% in the last 5 years, clearly besting the market return of around 55% (ignoring dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 36% in the last year, including dividends.

Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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 last half decade, Hotel Properties became profitable. That’s generally thought to be a genuine positive, so investors may expect to see an increasing share price. Since the company was unprofitable five years ago, but not three years ago, it’s worth taking a look at the returns in the last three years, too. We can see that the Hotel Properties share price is up 43% in the last three years. Meanwhile, EPS is up 143% per year. This EPS growth is higher than the 13% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. Of course, with a P/E ratio of 69.97, the market remains optimistic.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Hotel Properties’ earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Hotel Properties, it has a TSR of 79% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

We’re pleased to report that Hotel Properties shareholders have received a total shareholder return of 36% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock’s performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should learn about the 3 warning signs we’ve spotted with Hotel Properties (including 1 which makes us a bit uncomfortable) .

For those who like to find winning investments this free list of undervalued 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 Singaporean 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 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.