Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Playa Hotels & Resorts N.V. (NASDAQ:PLYA) share price had more than doubled in just one year - up 109%. On top of that, the share price is up 22% in about a quarter. Unfortunately the longer term returns are not so good, with the stock falling 3.7% in the last three years.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
Playa Hotels & Resorts isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Playa Hotels & Resorts actually shrunk its revenue over the last year, with a reduction of 34%. So we would not have expected the share price to rise 109%. It just goes to show the market doesn't always pay attention to the reported numbers. Of course, it could be that the market expected this revenue drop.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).NasdaqGS:PLYA Earnings and Revenue Growth October 11th 2021
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Pleasingly, Playa Hotels & Resorts' total shareholder return last year was 109%. That certainly beats the loss of about 1.2% per year over three years. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. It's always interesting to track share price performance over the longer term. But to understand Playa Hotels & Resorts better, we need to consider many other factors. For instance, we've identified 2 warning signs for Playa Hotels & Resorts that you should be aware of.
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.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
In This StoryPLYA
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