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Strong week for Sotherly Hotels (NASDAQ:SOHO) shareholders doesn't alleviate pain of three-year loss

It is doubtless a positive to see that the Sotherly Hotels Inc. (NASDAQ:SOHO) share price has gained some 51% in the last three months. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 60% in that period. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.

The recent uptick of 29% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

View our latest analysis for Sotherly Hotels

Given that Sotherly Hotels only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last three years Sotherly Hotels saw its revenue shrink by 16% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 17% (annualized) in the same time period. When revenue is dropping, and losses are still costing, and the share price sinking fast, it's fair to ask if something is remiss. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

We know that Sotherly Hotels has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Sotherly Hotels will earn in the future (free profit forecasts).

A Different Perspective

We're pleased to report that Sotherly Hotels shareholders have received a total shareholder return of 34% over one year. Notably the five-year annualised TSR loss of 8% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Sotherly Hotels (at least 2 which are potentially serious) , 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 US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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