Investors three-year losses continue as Zee Entertainment Enterprises (NSE:ZEEL) dips a further 6.4% this week, earnings continue to decline
If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Zee Entertainment Enterprises Limited (NSE:ZEEL) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 64% share price collapse, in that time. The more recent news is of little comfort, with the share price down 34% in a year. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Zee Entertainment Enterprises saw its EPS decline at a compound rate of 6.5% per year, over the last three years. This reduction in EPS is slower than the 29% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Zee Entertainment Enterprises has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
Investors in Zee Entertainment Enterprises had a tough year, with a total loss of 32% (including dividends), against a market gain of about 0.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Zee Entertainment Enterprises is showing 1 warning sign in our investment analysis , you should know about...
We will like Zee Entertainment Enterprises better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian 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.