Yahoo Finance Cineplex (TSE:CGX) shareholders have endured a 65% loss from investing in the stock five years ago
Generally speaking long term investing is the way to go. But unfortunately, some companies simply don't succeed. To wit, the Cineplex Inc. (TSE:CGX) share price managed to fall 67% over five long years. That's not a lot of fun for true believers. More recently, the share price has dropped a further 9.8% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading 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
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Cineplex became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
Arguably, the revenue drop of 7.5% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Cineplex has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About The Total Shareholder Return (TSR)?
We've already covered Cineplex's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Cineplex's TSR, which was a 65% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Cineplex shareholders are down 18% for the year, but the market itself is up 2.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 10% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Cineplex (of which 3 are concerning!) you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian 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.
