Golden Entertainment (NASDAQ:GDEN) climbs 7.7% this week, taking five-year gains to 136%

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Golden Entertainment, Inc. (NASDAQ:GDEN) share price has soared 119% in the last half decade. Most would be very happy with that. It's even up 7.7% in the last week.

Since it's been a strong week for Golden Entertainment shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Golden Entertainment

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 last half decade, Golden Entertainment became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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. In fact, the Golden Entertainment stock price is 35% lower in the last three years. In the same period, EPS is up 46% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -14% per year.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Golden Entertainment has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Golden 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). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Golden Entertainment, it has a TSR of 136% 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!

A Different Perspective

While the broader market gained around 38% in the last year, Golden Entertainment shareholders lost 3.9% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 19% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 5 warning signs we've spotted with Golden Entertainment (including 3 which are concerning) .

We will like Golden Entertainment better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.