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For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Nine Entertainment Co. Holdings Limited (ASX:NEC) shareholders, since the share price is down 55% in the last three years, falling well short of the market return of around 24%. And over the last year the share price fell 40%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.
After losing 4.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for Nine Entertainment Holdings
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years that the share price fell, Nine Entertainment Holdings' earnings per share (EPS) dropped by 11% each year. The share price decline of 24% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Nine Entertainment Holdings' earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Nine Entertainment Holdings the TSR over the last 3 years was -47%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!