Cineworld Group's (LON:CINE) Shareholders Are Down 89% On Their Shares

It is a pleasure to report that the Cineworld Group plc (LON:CINE) is up 118% in the last quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 89% in the last three years. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

See our latest analysis for Cineworld Group

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. 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.

Cineworld Group saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Cineworld Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Cineworld Group'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. Dividends have been really beneficial for Cineworld Group shareholders, and that cash payout explains why its total shareholder loss of 70%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

While the broader market lost about 5.0% in the twelve months, Cineworld Group shareholders did even worse, losing 69%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% 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. It's always interesting to track share price performance over the longer term. But to understand Cineworld Group better, we need to consider many other factors. Even so, be aware that Cineworld Group is showing 2 warning signs in our investment analysis , and 1 of those is significant...

Cineworld Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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