Did Changing Sentiment Drive Daktronics’s Share Price Down By 42%?

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Daktronics, Inc. (NASDAQ:DAKT) shareholders should be happy to see the share price up 12% in the last month. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 42% in that half decade.

See our latest analysis for Daktronics

To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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).

Looking back five years, both Daktronics’s share price and EPS declined; the latter at a rate of 24% per year. This fall in the EPS is worse than the 10% compound annual share price fall. So investors might expect EPS to bounce back — or they may have previously foreseen the EPS decline. The high P/E ratio of 60.98 suggests that shareholders believe earnings will grow in the years ahead.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NasdaqGS:DAKT Past and Future Earnings, February 22nd 2019
NasdaqGS:DAKT Past and Future Earnings, February 22nd 2019

We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Daktronics’s earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Daktronics’s TSR for the last 5 years was -31%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Daktronics shareholders are down 5.6% for the year (even including dividends), but the market itself is up 3.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 7.1% doled out over the last five years. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course Daktronics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.