It is doubtless a positive to see that the Emmis Communications Corporation (NASDAQ:EMMS) share price has gained some 55% in the last three months. But if you look at the last five years the returns have not been good. After all, the share price is down 47% in that time, significantly under-performing the market.
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.
During the five years over which the share price declined, Emmis Communications's earnings per share (EPS) dropped by 50% each year. This fall in the EPS is worse than the 12% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline. With a P/E ratio of 45.70, it's fair to say the market sees a brighter future for the business.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Emmis Communications's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that Emmis Communications shareholders have received a total shareholder return of 12% over the last year. Notably the five-year annualised TSR loss of 12% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. If you would like to research Emmis Communications in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Emmis Communications may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.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.