Yahoo Finance Foot Locker (NYSE:FL) investors are sitting on a loss of 62% if they invested three years ago
If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term Foot Locker, Inc. (NYSE:FL) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 66% drop in the share price over that period. The falls have accelerated recently, with the share price down 38% in the last three months.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Foot Locker
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over the three years that the share price declined, Foot Locker's earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But it's safe to say we'd generally expect the share price to be lower as a result!
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Foot Locker's earnings, revenue and cash flow.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Foot Locker's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Foot Locker shareholders, and that cash payout explains why its total shareholder loss of 62%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
Foot Locker shareholders are down 12% for the year, but the market itself is up 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% 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. 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. Even so, be aware that Foot Locker is showing 1 warning sign in our investment analysis , you should know about...
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap 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 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.