Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) shareholders should be happy to see the share price up 12% in the last week. Meanwhile over the last three years the stock has dropped hard. Regrettably, the share price slid 55% in that period. So it's good to see it climbing back up. Perhaps the company has turned over a new leaf.

The recent uptick of 12% could be a positive sign of things to come, so let's take a look at historical fundamentals.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Dave & Buster's Entertainment saw its EPS decline at a compound rate of 85% per year, over the last three years. This was, in part, due to extraordinary items impacting earnings. This fall in the EPS is worse than the 23% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 2.12k.

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

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.

A Different Perspective

Dave & Buster's Entertainment shareholders are down 27% for the year, but the market itself is up 18%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. 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. 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.

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.

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.