Yahoo Finance Investors in Yelp (NYSE:YELP) have unfortunately lost 20% over the last five years
For many, the main point of investing is to generate higher returns than the overall market. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Yelp Inc. (NYSE:YELP), since the last five years saw the share price fall 20%. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. Of course, this share price action may well have been influenced by the 8.0% decline in the broader market, throughout the period.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Yelp
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 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.
Yelp became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
Revenue is actually up 5.1% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Yelp is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Yelp in this interactive graph of future profit estimates.
A Different Perspective
Yelp shareholders are up 2.9% for the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 4% per year, over five years. So this might be a sign the business has turned its fortunes around. 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. Take risks, for example - Yelp has 1 warning sign we think you should be aware of.
For those who like to find winning investments 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 US 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.
