Yahoo Finance PENN Entertainment (NASDAQ:PENN) shareholders are up 7.2% this past week, but still in the red over the last three years
As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of PENN Entertainment, Inc. (NASDAQ:PENN) investors who have held the stock for three years as it declined a whopping 81%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. The more recent news is of little comfort, with the share price down 38% in a year. Furthermore, it's down 27% in about a quarter. That's not much fun for holders. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
On a more encouraging note the company has added US$175m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
Check out our latest analysis for PENN Entertainment
Given that PENN Entertainment didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, PENN Entertainment grew revenue at 16% per year. That's a pretty good rate of top-line growth. So it seems unlikely the 22% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
PENN Entertainment shareholders are down 38% for the year, but the market itself is up 27%. 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 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. It's always interesting to track share price performance over the longer term. But to understand PENN Entertainment better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for PENN Entertainment you should be aware of.
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 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.
