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It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Ten Entertainment Group plc (LON:TEG) have tasted that bitter downside in the last year, as the share price dropped 23%. That's disappointing when you consider the market returned -0.4%. Ten Entertainment Group may have better days ahead, of course; we've only looked at a one year period. On top of that, the share price has dropped a further 8.8% in a month.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the Ten Entertainment Group share price fell, it actually saw its earnings per share (EPS) improve by 58%. It could be that the share price was previously over-hyped. The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.
The fact that the dividend has fallen is probably weighing on the share price, as it implies some form of business stress.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
It is of course excellent to see how Ten Entertainment Group has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Ten Entertainment Group's financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Ten Entertainment Group's TSR for the last year was -19%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We doubt Ten Entertainment Group shareholders are happy with the loss of 19% over twelve months (even including dividends). That falls short of the market, which lost 0.4%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 4.4%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on Ten Entertainment Group it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.