Topgolf Callaway Brands' (NYSE:MODG three-year decrease in earnings delivers investors with a 61% loss

If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Topgolf Callaway Brands Corp. (NYSE:MODG) shareholders. Regrettably, they have had to cope with a 61% drop in the share price over that period. The more recent news is of little comfort, with the share price down 37% in a year. More recently, the share price has dropped a further 32% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Topgolf Callaway Brands

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Topgolf Callaway Brands saw its EPS decline at a compound rate of 66% per year, over the last three years. In comparison the 27% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. This positive sentiment is also reflected in the generous P/E ratio of 93.81.

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. It might be well worthwhile taking a look at our free report on Topgolf Callaway Brands' earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 25% in the last year, Topgolf Callaway Brands shareholders lost 37%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Topgolf Callaway Brands better, we need to consider many other factors. Even so, be aware that Topgolf Callaway Brands is showing 2 warning signs in our investment analysis , you should know about...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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

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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.