Investors in SeaWorld Entertainment (NYSE:SEAS) have made a fantastic return of 308% over the past five years

Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. To wit, the SeaWorld Entertainment, Inc. (NYSE:SEAS) share price has soared 308% over five years. This just goes to show the value creation that some businesses can achieve. And in the last month, the share price has gained 27%. But this could be related to good market conditions -- stocks in its market are up 12% in the last month.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for SeaWorld Entertainment

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the last half decade, SeaWorld Entertainment became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, 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 returns in the last three years, too. Indeed, the SeaWorld Entertainment share price has gained 73% in three years. In the same period, EPS is up 52% per year. This EPS growth is higher than the 20% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on SeaWorld Entertainment's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that SeaWorld Entertainment shareholders have received a total shareholder return of 13% over the last year. Having said that, the five-year TSR of 32% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand SeaWorld Entertainment better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with SeaWorld Entertainment , and understanding them should be part of your investment process.

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 US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here