Sphere Entertainment (NYSE:SPHR) pulls back 4.9% this week, but still delivers shareholders 7.3% CAGR over 3 years

As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Sphere Entertainment Co. (NYSE:SPHR) shareholders have had that experience, with the share price dropping 43% in three years, versus a market return of about 22%.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Sphere Entertainment

Because Sphere Entertainment made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

Over three years, Sphere Entertainment grew revenue at 2.1% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. Indeed, the stock dropped 13% over the last three years. If revenue growth accelerates, we might see the share price bounce. But ultimately the key will be whether the company can become profitability.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Sphere Entertainment in this interactive graph of future profit estimates.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Sphere Entertainment's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Sphere Entertainment hasn't been paying dividends, but its TSR of 24% exceeds its share price return of -43%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Sphere Entertainment produced a TSR of 16% over the last year. It's always nice to make money but this return falls short of the market return which was about 35% for the year. On the bright side that gain is actually better than the average return of 7% over the last three years, implying that the company is doing better recently. If the business can justify the share price gain with improving fundamental data, then there could be more gains to come. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Sphere Entertainment you should be aware of.

Sphere 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.