Yahoo Finance PENN Entertainment (NASDAQ:PENN) sheds US$292m, company earnings and investor returns have been trending downwards for past year
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 PENN Entertainment, Inc. (NASDAQ:PENN) have tasted that bitter downside in the last year, as the share price dropped 40%. That's well below the market decline of 23%. On the bright side, the stock is actually up 15% in the last three years. More recently, the share price has dropped a further 12% in a month.
Since PENN Entertainment has shed US$292m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
View our latest analysis for PENN Entertainment
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unhappily, PENN Entertainment had to report a 40% decline in EPS over the last year. Remarkably, he share price decline of 40% per year is particularly close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
While the broader market lost about 23% in the twelve months, PENN Entertainment shareholders did even worse, losing 40%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.5% per year over five years. 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. For example, we've discovered 2 warning signs for PENN Entertainment that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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