Madison Square Garden Sports (NYSE:MSGS) shareholder returns have been decent, earning 51% in 3 years

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 Madison Square Garden Sports Corp. (NYSE:MSGS) share price is up 44% in the last three years, clearly besting the market return of around 23% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 32% in the last year.

Since the stock has added US$178m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Madison Square Garden Sports

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Madison Square Garden Sports became profitable within the last three years. So we would expect a higher share price over the period.

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

We know that Madison Square Garden Sports has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About The Total Shareholder Return (TSR)?

We've already covered Madison Square Garden Sports' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Madison Square Garden Sports hasn't been paying dividends, but its TSR of 51% exceeds its share price return of 44%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Madison Square Garden Sports' TSR for the year was broadly in line with the market average, at 32%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 3%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Madison Square Garden Sports better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Madison Square Garden Sports you should be aware of, and 2 of them can't be ignored.

For those who like to find winning investments this free list of undervalued 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.