Further weakness as Caesars Entertainment (NASDAQ:CZR) drops 3.9% this week, taking three-year losses to 44%

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Caesars Entertainment, Inc. (NASDAQ:CZR) shareholders, since the share price is down 44% in the last three years, falling well short of the market return of around 48%. The falls have accelerated recently, with the share price down 18% in the last three months.

If the past week is anything to go by, investor sentiment for Caesars Entertainment isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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Caesars Entertainment isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years, Caesars Entertainment saw its revenue grow by 3.2% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. The stock dropped 13% during that time. If revenue growth accelerates, we might see the share price bounce. But the real upside for shareholders will be if the company can start generating profits.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Caesars Entertainment stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Caesars Entertainment shareholders are down 15% for the year, but the market itself is up 13%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Caesars Entertainment by clicking this link.

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.