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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Event Hospitality & Entertainment Limited (ASX:EVT) shareholders for doubting their decision to hold, with the stock down 36% over a half decade. And we doubt long term believers are the only worried holders, since the stock price has declined 32% over the last twelve months. On the other hand the share price has bounced 7.8% over the last week.
Check out our latest analysis for Event Hospitality & Entertainment
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
While the share price declined over five years, Event Hospitality & Entertainment actually managed to increase EPS by an average of 3.5% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.
We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It could be that the revenue decline of 4.2% per year is viewed as evidence that Event Hospitality & Entertainment is shrinking. With dividends up, but revenue down, some investors might be concluding that the company is no longer growing.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Event Hospitality & Entertainment's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Event Hospitality & Entertainment, it has a TSR of -22% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!