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We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the SkyCity Entertainment Group Limited (NZSE:SKC) share price managed to fall 64% over five long years. That's not a lot of fun for true believers. And some of the more recent buyers are probably worried, too, with the stock falling 23% in the last year.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for SkyCity Entertainment Group
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Over five years SkyCity Entertainment Group's earnings per share dropped significantly, falling to a loss, with the share price also lower. The recent extraordinary items contributed to this situation. At present it's hard to make valid comparisons between EPS and the share price. However, we can say we'd expect to see a falling share price in this scenario.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between SkyCity Entertainment Group's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. SkyCity Entertainment Group's TSR of was a loss of 58% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
While the broader market gained around 15% in the last year, SkyCity Entertainment Group shareholders lost 21%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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. 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. For example, we've discovered 1 warning sign for SkyCity Entertainment Group that you should be aware of before investing here.