It's to an investor's eventual sorrow to forget that a company's performance and its stock's performance are entirely separate matters -- at least in the short run. Luxury-hotel operator Four Seasons (NYSE:FS) wasn't that good of a company when the stock was at almost $85 a share a year and a half ago, and it wasn't that bad of a company when it dropped below $50 in December of last year.
And while the stock has been adjusting to overinflated expectations of a boom in luxury spending (and/or the greater fool theory in the stock market), the company has continued to chug along.
To wit, total revenue was down almost 9% this quarter, but management fee revenue rose almost 26%, and the company reported systemwide RevPAR (average room revenue per available room) growth of almost 12%. Expenses were also well controlled (the gross operating margin improved by 250 basis points), and the company posted a net result that was both significantly higher than last year's and a fair bit better than analyst estimates.
The results were surprisingly similar around the globe. RevPAR grew by a low-to-mid-teens figure everywhere but in Asia, and there was also consistent operating-margin improvement across the board. It's a simple formula, but it works: Target high-end customers and treat them well, and you'll be rewarded.
Before today's 10% jump, I might have thought these shares were a little interesting. And while I'm not doubting the company's ability to continue to deliver solid RevPAR and improved margins, that chart of the slide down from $80-plus is a pretty scary reminder of why it often pays to be conservative and cheap.
Lodging can be a flaky sector, and I'm not really sold on it as a place to find long-term winners, but there's not much doubt that a lot of players are posting solid growth right now. And given that I don't see an imminent economic collapse, there could be more on the way. This isn't a recommendation, per se, but for those considering Four Seasons, you might want to also take a gander at LaSalle (NYSE:LHO), Starwood (NYSE:HOT), Sunstone Hotel Investors (NYSE:SHO), and Hilton (NYSE:HLT) as you consider your options.
For more hospitable Foolishness:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
