Shareholders in Sphere Entertainment (NYSE:SPHR) are in the red if they invested three years ago
It is a pleasure to report that the Sphere Entertainment Co. (NYSE:SPHR) is up 48% in the last quarter. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 55% in the last three years, falling well short of the market return.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
View our latest analysis for Sphere Entertainment
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Sphere Entertainment became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.
We think that the revenue decline over three years, at a rate of 11% per year, probably had some shareholders looking to sell. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. So we recommend checking out this free report showing consensus forecasts
What About The Total Shareholder Return (TSR)?
We've already covered Sphere Entertainment's share price action, but we should also mention its total shareholder return (TSR). 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. We note that Sphere Entertainment's TSR, at -2.1% is higher than its share price return of -55%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Pleasingly, Sphere Entertainment's total shareholder return last year was 97%. This recent result is much better than the 0.7% drop suffered by shareholders each year (on average) over the last three. It could well be that the business has turned around -- or else regained the confidence of investors. It's always interesting to track share price performance over the longer term. But to understand Sphere Entertainment better, we need to consider many other factors. Take risks, for example - Sphere Entertainment has 2 warning signs we think you should be aware of.
Sphere Entertainment is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
