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It hasn't been the best quarter for World Wrestling Entertainment, Inc. ( NYSE:WWE ) shareholders, since the share price has fallen 17% in that time. But over five years returns have been remarkably great. In that time, the share price has soared some 539% higher! So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
We love happy stories like this one. The company should be really proud of that performance!
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. 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, World Wrestling 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 World Wrestling Entertainment share price has gained 302% in three years. During the same period, EPS grew by 38% each year. This EPS growth is lower than the 59% average annual increase in the share price over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that World Wrestling Entertainment has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling World Wrestling Entertainment stock, you should check out this FREE detailed report on its balance sheet .
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, World Wrestling Entertainment's TSR for the last 5 years was 610%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that World Wrestling Entertainment shareholders have received a total shareholder return of 20% over the last year. Of course, that includes the dividend. However, the TSR over five years, coming in at 48% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. If you would like to research World Wrestling Entertainment in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.