Diversification is a key tool for dealing with stock price volatility. But if you're going to beat the market overall, you need to have individual stocks that outperform. One such company is Hotel Property Investments (ASX:HPI), which saw its share price increase 36% in the last year, slightly above the market return of around 36% (not including dividends). The longer term returns have not been as good, with the stock price only 0.9% higher than it was three years ago.

See our latest analysis for Hotel Property Investments

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year, Hotel Property Investments actually saw its earnings per share drop 2.8%.

We don't think that the decline in earnings per share is a good measure of the business over the last twelve months. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Absent any improvement, we don't think a thirst for dividends is pushing up the Hotel Property Investments' share price. Rather, we'd posit that the revenue increase of 4.3% might be more meaningful. Revenue growth often does precede earnings growth, so some investors might be willing to forgo profits today because they have their eyes fixed firmly on the future.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Hotel Property Investments will earn in the future (free profit forecasts).

What About Dividends?

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Hotel Property Investments the TSR over the last year was 44%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Hotel Property Investments shareholders have received a total shareholder return of 44% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Hotel Property Investments better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Hotel Property Investments (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

This article by Simply Wall St is general in nature. 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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