Dave & Buster's Entertainment (NASDAQ:PLAY) delivers shareholders 7.7% CAGR over 3 years, surging 9.8% in the last week alone

Thanks in no small measure to Vanguard founder Jack Bogle, it's easy buy a low cost index fund, which should provide the average market return. But you can make superior returns by picking better-than average stocks. For example, the Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) share price is up 25% in the last three years, slightly above the market return. The bad news is that the share price seems to lack positive momentum recently, since it has dropped 7.7% in the last year.

The past week has proven to be lucrative for Dave & Buster's Entertainment investors, so let's see if fundamentals drove the company's three-year performance.

Check out our latest analysis for Dave & Buster's Entertainment

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Dave & Buster's Entertainment became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Dave & Buster's Entertainment's earnings, revenue and cash flow.

A Different Perspective

Dave & Buster's Entertainment shareholders are down 7.7% for the year, but the market itself is up 34%. 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 0.9% per year over five years. 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 Dave & Buster's Entertainment better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Dave & Buster's Entertainment (including 1 which is a bit unpleasant) .

Dave & Buster's Entertainment is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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.