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It hasn't been the best quarter for G5 Entertainment AB (publ) (STO:G5EN) shareholders, since the share price has fallen 21% in that time. But that doesn't change the fact that shareholders have received really good returns over the last five years. We think most investors would be happy with the 205% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
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View our latest analysis for G5 Entertainment
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
During the five years of share price growth, G5 Entertainment moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the G5 Entertainment share price has gained 187% in three years. In the same period, EPS is up 81% per year. This EPS growth is higher than the 42% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 7.26.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how G5 Entertainment has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at G5 Entertainment's financial health with this free report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, G5 Entertainment's TSR for the last 5 years was 216%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!