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Shareholders in Cineplex (TSE:CGX) are in the red if they invested five years ago

Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Cineplex Inc. (TSE:CGX) share price dropped 67% in the last half decade. We certainly feel for shareholders who bought near the top. On top of that, the share price is down 8.3% in the last week. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Cineplex

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 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).

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During five years of share price growth, Cineplex moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

It could be that the revenue decline of 3.1% per year is viewed as evidence that Cineplex is shrinking. This has probably encouraged some shareholders to sell down the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on Cineplex

A Different Perspective

While the broader market gained around 13% in the last year, Cineplex shareholders lost 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 11% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Cineplex better, we need to consider many other factors. Even so, be aware that Cineplex is showing 1 warning sign in our investment analysis , you should know about...

Cineplex is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.