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The 22% return delivered to MGM Resorts International's (NYSE:MGM) shareholders actually lagged YoY earnings growth

·3 min read

Investors can buy low cost index fund if they want to receive the average market return. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the MGM Resorts International (NYSE:MGM) share price is up 21% in the last three years, that falls short of the market return. Disappointingly, the share price is down 17% in the last year.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for MGM Resorts International

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.

MGM Resorts International became profitable within the last three years. So we would expect a higher share price over the period.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of MGM Resorts International's earnings, revenue and cash flow.

A Different Perspective

We regret to report that MGM Resorts International shareholders are down 17% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Even so, be aware that MGM Resorts International is showing 2 warning signs in our investment analysis , and 1 of those is significant...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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