Did You Manage To Avoid LeoVegas's (STO:LEO) 33% Share Price Drop?

Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term LeoVegas AB (publ) (STO:LEO) shareholders, since the share price is down 33% in the last three years, falling well short of the market return of around -0.6%. The falls have accelerated recently, with the share price down 11% in the last three months. Of course, this share price action may well have been influenced by the 23% decline in the broader market, throughout the period.

View our latest analysis for LeoVegas

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

LeoVegas saw its EPS decline at a compound rate of 15% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 13% per year. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of LeoVegas'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). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for LeoVegas the TSR over the last 3 years was -28%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's never nice to take a loss, LeoVegas shareholders can take comfort that , including dividends, their trailing twelve month loss of 5.7% wasn't as bad as the market loss of around -7.8%. The one-year return is also not as bad as the 10% per annum loss investors have suffered over the last three years. It is of course not much comfort to know that the losses have slowed. Shareholders will be hoping for a proper turnaround, no doubt. It's always interesting to track share price performance over the longer term. But to understand LeoVegas better, we need to consider many other factors. Case in point: We've spotted 7 warning signs for LeoVegas you should be aware of.

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 SE 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.