Investors five-year losses continue as Six Flags Entertainment (NYSE:SIX) dips a further 7.7% this week, earnings continue to decline
We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the Six Flags Entertainment Corporation (NYSE:SIX) share price is a whole 65% lower. That's not a lot of fun for true believers. More recently, the share price has dropped a further 16% in a month.
After losing 7.7% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for Six Flags Entertainment
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Looking back five years, both Six Flags Entertainment's share price and EPS declined; the latter at a rate of 17% per year. This change in EPS is reasonably close to the 19% average annual decrease in the share price. This implies that the market has had a fairly steady view of the stock. Rather, the share price change has reflected changes in earnings per share.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider 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 Six Flags Entertainment's earnings, revenue and cash flow.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Six Flags Entertainment's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Six Flags Entertainment's TSR of was a loss of 61% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Six Flags Entertainment provided a TSR of 10.0% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 10% endured over half a decade. So this might be a sign the business has turned its fortunes around. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Six Flags Entertainment , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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