If you love investing in stocks you’re bound to buy some losers. But long term 888 Holdings plc (LON:888) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 70% share price collapse, in that time. And over the last year the share price fell 50%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 50% in the last three months. Of course, this share price action may well have been influenced by the 32% decline in the broader market, throughout the period.
See our latest analysis for 888 Holdings
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. 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 three years of share price decline, 888 Holdings actually saw its earnings per share (EPS) improve by 17% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
It’s worth taking a look at other metrics, because the EPS growth doesn’t seem to match with the falling share price.
Given the healthiness of the dividend payments, we doubt that they’ve concerned the market. Revenue has been pretty flat over three years, so that isn’t an obvious reason shareholders would sell. A closer look at revenue and profit trends might yield insights.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling 888 Holdings stock, you should check out this FREE detailed report on its balance sheet.
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 888 Holdings the TSR over the last 3 years was -64%, 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
While the broader market lost about 23% in the twelve months, 888 Holdings shareholders did even worse, losing 47% (even including dividends) . However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 7.5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It’s always interesting to track share price performance over the longer term. But to understand 888 Holdings better, we need to consider many other factors. Even so, be aware that 888 Holdings is showing 2 warning signs in our investment analysis , you should know about…
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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