Investors more bullish on Topgolf Callaway Brands (NYSE:MODG) this week as stock pops 12%, despite earnings trending downwards over past three years

While Topgolf Callaway Brands Corp. (NYSE:MODG) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 17% in the last quarter. In contrast the stock is up over the last three years. However, it's unlikely many shareholders are elated with the share price gain of 15% over that time, given the rising market.

Since it's been a strong week for Topgolf Callaway Brands shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Topgolf Callaway Brands

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years, Topgolf Callaway Brands failed to grow earnings per share, which fell 6.3% (annualized).

Earnings per share have melted like a stack of ice cubes, in stark contrast to the share price. So we'll need to take a look at some different metrics to try to understand why the share price remains solid.

It could be that the revenue growth of 38% per year is viewed as evidence that Topgolf Callaway Brands is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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. So we recommend checking out this free report showing consensus forecasts

Topgolf Callaway Brands shareholders are down 15% for the year, but the market itself is up 3.1%. 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 0.7% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Topgolf Callaway Brands .

Topgolf Callaway Brands is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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