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Gray Television (NYSE:GTN) sheds 11% this week, as yearly returns fall more in line with earnings growth

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·3 min read
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Gray Television, Inc. (NYSE:GTN) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 78%, less than the market return of 106%.

In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for Gray Television

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over half a decade, Gray Television managed to grow its earnings per share at 34% a year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 8.30 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

Dive deeper into Gray Television's key metrics by checking this interactive graph of Gray Television's 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Gray Television the TSR over the last 5 years was 80%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Gray Television has rewarded shareholders with a total shareholder return of 22% in the last twelve months. And that does include the dividend. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Gray Television has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

But note: Gray Television 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.

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.