Even the best investor on earth makes unsuccessful investments. But it's not unreasonable to try to avoid truly shocking capital losses. So we hope that those who held Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) during the last year don't lose the lesson, in addition to the 71% hit to the value of their shares. That'd be a striking reminder about the importance of diversification. To make matters worse, the returns over three years have also been really disappointing (the share price is 61% lower than three years ago). Furthermore, it's down 38% in about a quarter. That's not much fun for holders.

With the stock having lost 11% 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 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).

Unhappily, Dave & Buster's Entertainment had to report a 25% decline in EPS over the last year. This reduction in EPS is not as bad as the 71% share price fall. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 8.19.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Dave & Buster's Entertainment's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 9.1% in the last year, Dave & Buster's Entertainment shareholders lost 71%. 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. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Dave & Buster's Entertainment better, we need to consider many other factors. For example, we've discovered 3 warning signs for Dave & Buster's Entertainment (1 doesn't sit too well with us!) that you should be aware of before investing here.

Dave & Buster's Entertainment is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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.