Does ONE Group Hospitality's (NASDAQ:STKS) Share Price Gain of 72% Match Its Business Performance?

By
Simply Wall St
Published
October 09, 2020

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, The ONE Group Hospitality, Inc. (NASDAQ:STKS) shareholders have seen the share price rise 72% over three years, well in excess of the market return (33%, not including dividends).

See our latest analysis for ONE Group Hospitality

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.

ONE Group Hospitality became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

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

NasdaqCM:STKS Earnings Per Share Growth October 9th 2020

It is of course excellent to see how ONE Group Hospitality has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling ONE Group Hospitality stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 23% in the last year, ONE Group Hospitality shareholders lost 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 5% 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. 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. For instance, we've identified 4 warning signs for ONE Group Hospitality (2 are significant) that you should be aware of.

We will like ONE Group Hospitality better if we see some big insider buys. While we wait, check out this free list of growing companies 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 US exchanges.

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This article by Simply Wall St is general in nature. 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.
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