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Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. To wit, the J D Wetherspoon plc (LON:JDW) share price managed to fall 60% over five long years. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 25%.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for J D Wetherspoon
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
J D Wetherspoon became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
The modest 2.0% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 8.7% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how J D Wetherspoon has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
J D Wetherspoon shareholders are down 23% for the year (even including dividends), but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for J D Wetherspoon (1 is concerning!) that you should be aware of before investing here.