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It is a pleasure to report that the Drive Shack Inc. (NYSE:DS) is up 61% in the last quarter. But that's small comfort given the dismal price performance over the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 64% in that time. It's not that amazing to see a bounce after a drop like that. It may be that the fall was an overreaction.
Drive Shack wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In just one year Drive Shack saw its revenue fall by 7.4%. That looks pretty grim, at a glance. In the absence of profits, it's not unreasonable that the share price fell 64%. Fingers crossed this is the low ebb for the stock. We don't generally like to own companies with falling revenues and no profits, so we're pretty cautious of this one, at the moment.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Drive Shack will earn in the future (free profit forecasts).
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Drive Shack'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. Dividends have been really beneficial for Drive Shack shareholders, and that cash payout explains why its total shareholder loss of 64%, over the last year, isn't as bad as the share price return.
A Different Perspective
Drive Shack shareholders are down 64% for the year, but the market itself is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9.3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. To that end, you should learn about the 2 warning signs we've spotted with Drive Shack (including 1 which is is potentially serious) .
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.
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. 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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