Further weakness as Tripadvisor (NASDAQ:TRIP) drops 3.5% this week, taking five-year losses to 64%

We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the Tripadvisor, Inc. (NASDAQ:TRIP) share price managed to fall 68% over five long years. That's an unpleasant experience for long term holders. We also note that the stock has performed poorly over the last year, with the share price down 36%. Shareholders have had an even rougher run lately, with the share price down 38% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Since Tripadvisor has shed US$81m 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 Tripadvisor

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

We know that Tripadvisor has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

It could be that the revenue decline of 8.4% per year is viewed as evidence that Tripadvisor is shrinking. This has probably encouraged some shareholders to sell down the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth

Tripadvisor is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Tripadvisor will earn in the future (free analyst consensus estimates)

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Tripadvisor's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Tripadvisor's TSR, at -64% is higher than its share price return of -68%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

Tripadvisor shareholders are down 36% for the year, but the market itself is up 2.6%. 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 10% 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. You could get a better understanding of Tripadvisor's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

But note: Tripadvisor may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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