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The E.W. Scripps Company (NASDAQ:SSP) shareholders should be happy to see the share price up 12% in the last month. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 89% in that time. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
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 E.W. Scripps
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
We know that E.W. Scripps has been profitable in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics might give us a better handle on how its value is changing over time.
With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Investors in E.W. Scripps had a tough year, with a total loss of 75%, against a market gain of about 27%. 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 13% 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. 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 1 warning sign with E.W. Scripps , and understanding them should be part of your investment process.