Yahoo Finance Did You Miss Red Rock Resorts's (NASDAQ:RRR) 16% Share Price Gain?
Buying a low-cost index fund will get you the average market return. But across the board there are plenty of stocks that underperform the market. For example, the Red Rock Resorts, Inc. (NASDAQ:RRR) share price return of 16% over three years lags the market return in the same period. Disappointingly, the share price is down 8.0% in the last year.
View our latest analysis for Red Rock Resorts
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
During the three years of share price growth, Red Rock Resorts actually saw its earnings per share (EPS) drop 4.8% per year. In this instance, recent extraordinary items impacted the earnings.
The comparison of the modestly falling earnings per share, and the relatively resilient share price, suggests the market is less cautious about the stock, these days. Having said that, if the EPS falls continue we'd be surprised to see a sustained increase in share price.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Red Rock Resorts's TSR for the last 3 years was 21%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Over the last year, Red Rock Resorts shareholders took a loss of 6.4% , including dividends . In contrast the market gained about 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Investors are up over three years, booking 6.7% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. It's always interesting to track share price performance over the longer term. But to understand Red Rock Resorts better, we need to consider many other factors. Be aware that Red Rock Resorts is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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. Thank you for reading.
