Dine Brands Global (NYSE:DIN) sheds US$48m, company earnings and investor returns have been trending downwards for past three years

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Dine Brands Global, Inc. (NYSE:DIN) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 69% drop in the share price over that period. The more recent news is of little comfort, with the share price down 51% in a year. The falls have accelerated recently, with the share price down 28% in the last three months.

With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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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.

Dine Brands Global saw its EPS decline at a compound rate of 10% per year, over the last three years. This reduction in EPS is slower than the 33% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 5.27.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here .

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Dine Brands Global the TSR over the last 3 years was -65%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Dine Brands Global had a tough year, with a total loss of 47% (including dividends), against a market gain of about 4.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for Dine Brands Global (1 can't be ignored) that you should be aware of.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.