It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For instance the Hilton Grand Vacations Inc. (NYSE:HGV) share price is 125% higher than it was three years ago. That sort of return is as solid as granite. We note the stock price is up 2.2% in the last seven days.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years of share price growth, Hilton Grand Vacations achieved compound earnings per share growth of 20% per year. In comparison, the 31% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That’s not necessarily surprising considering the three-year track record of earnings growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Hilton Grand Vacations has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
It’s nice to see that Hilton Grand Vacations shareholders have