The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Townsquare Media, Inc. (NYSE:TSQ) share price is up 52% in the last year, clearly besting the market return of around 22% (not including dividends). So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 13% in 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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over the last twelve months Townsquare Media went from profitable to unprofitable. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. It may be that the company has done well on other metrics.
However the year on year revenue growth of 14% would help. We do see some companies suppress earnings in order to accelerate revenue growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Townsquare Media the TSR over the last year was 60%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Townsquare Media shareholders have received a total shareholder return of 60% over one year. And that does include the dividend. Notably the five-year annualised TSR loss of 4.1% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Townsquare Media better, we need to consider many other factors. Take risks, for example - Townsquare Media has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
But note: Townsquare Media may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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.