We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the SKYCITY Entertainment Group Limited (NZSE:SKC) share price is up 15% in the last year, that falls short of the market return. However, the longer term returns haven't been so impressive, with the stock up just 3.9% in the last three years.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
During the last year SKYCITY Entertainment Group grew its earnings per share (EPS) by 0.3%. The share price gain of 15% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on SKYCITY Entertainment Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for SKYCITY Entertainment Group the TSR over the last year was 22%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
SKYCITY Entertainment Group shareholders are up 22% for the year (even including dividends) . But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 6.8% per year over five year. This suggests the company might be improving over time. Before spending more time on SKYCITY Entertainment Group it might be wise to click here to see if insiders have been buying or selling shares.
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 NZ exchanges.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.