Golden Entertainment (NASDAQ:GDEN) is up 7.7% this week, representing a five-year gain of 136%.

When you buy a stock, there is always a chance that it will fall 100%. But essentially, a good company’s share price can increase by well over 100%. For example this Golden Entertainment, Inc. (NASDAQ:GDEN) stock price is up 119% over the last half decade. Most people would be very happy about that. In the last week it has actually increased by 7.7%.

With it being a strong week for Golden Entertainment shareholders, let’s take a look at the trend in the longer-term fundamentals.

Check out our latest analysis for Golden Entertainment

To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. 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).

Over the last half decade, Golden Entertainment became profitable. Sometimes the onset of profitability is a key turning point that can signal rapid earnings growth soon, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago but not three years ago, it’s worth taking a look at the last three years’ returns as well. In fact, Golden Entertainment’s share price has fallen 35% over the last three years. During the same period, profits increased by 46% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is declining at -14% annually.

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

It’s obviously great to see how Golden Entertainment has grown its profits over the years, but the future is more important to shareholders. If you’re thinking about buying or selling Golden Entertainment stock, you should check this out FREE Detailed report on the balance sheet.

What about dividends?

In addition to measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, as well as any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Golden Entertainment, its TSR for the last 5 years was 136%. This exceeds the share price return mentioned above. And it’s not worth guessing that dividend payments largely explain the divergence!

A different perspective

While the broader market gained around 38% over the last year, Golden Entertainment shareholders lost 3.9% (even including dividends). However, keep in mind that even the best stocks sometimes underperform the market over a twelve-month period. On the bright side, long-term shareholders have made money, with gains of 19% per year over half a decade. It could be that the recent sell-off represents an opportunity, so it might be worth checking the fundamentals for signs of a long-term growth trend. I find it very interesting to look at the share price as an indicator of business development in the long term. But to gain real insight, we need to consider other information too. For this purpose, you should inform yourself about the 5 warning signs We discovered (including three that are concerning) at Golden Entertainment.

We’ll like Golden Entertainment better if we see some big insider buying. Check this out while we wait free List of undervalued stocks (mainly small caps) with significant, recent insider buying.

Please note that 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 from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any stocks mentioned.