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Did Changing Sentiment Drive Tile Shop Holdings's (NASDAQ:TTS) Share Price Down A Painful 76%?

Simply Wall St

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As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Tile Shop Holdings, Inc. (NASDAQ:TTS) investors who have held the stock for three years as it declined a whopping 76%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. The more recent news is of little comfort, with the share price down 38% in a year. Furthermore, it's down 30% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

See our latest analysis for Tile Shop 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 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.

Tile Shop Holdings saw its EPS decline at a compound rate of 26% per year, over the last three years. The share price decline of 38% 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).

NasdaqGS:TTS Past and Future Earnings, May 30th 2019

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Tile Shop Holdings's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Tile Shop Holdings'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. Tile Shop Holdings's TSR of was a loss of 74% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Tile Shop Holdings shareholders are down 36% for the year (even including dividends), but the market itself is up 3.7%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 21% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Tile Shop Holdings by clicking this link.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.