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While it may not be enough for some shareholders, we think it is good to see the Nine Entertainment Co. Holdings Limited (ASX:NEC) share price up 22% in a single quarter. But that is minimal compensation for the share price under-performance over the last year. In fact the stock is down 24% in the last year, well below the market return.
Check out our latest analysis for Nine Entertainment Holdings
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 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).
Unhappily, Nine Entertainment Holdings had to report a 61% decline in EPS over the last year. This fall in the EPS is significantly worse than the 24% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
earnings-per-share-growth
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Nine Entertainment Holdings, it has a TSR of -20% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Nine Entertainment Holdings shareholders are down 20% for the year (even including dividends) . Unfortunately, that’s worse than the broader market decline of 6.8%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 5.6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Nine Entertainment Holdings better, we need to consider many other factors. Case in point: We’ve spotted 3 warning signs for Nine Entertainment Holdings you should be aware of, and 1 of them can’t be ignored.
Nine Entertainment Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
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