Yahoo Finance Grocery Outlet Holding (NASDAQ:GO) stock falls 4.0% in past week as three-year earnings and shareholder returns continue downward trend
Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Grocery Outlet Holding Corp. (NASDAQ:GO) shareholders have had that experience, with the share price dropping 42% in three years, versus a market return of about 21%. The more recent news is of little comfort, with the share price down 30% in a year. Shareholders have had an even rougher run lately, with the share price down 23% in the last 90 days.
Since Grocery Outlet Holding has shed US$85m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
View our latest analysis for Grocery Outlet Holding
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 three years that the share price fell, Grocery Outlet Holding's earnings per share (EPS) dropped by 19% each year. This fall in EPS isn't far from the rate of share price decline, which was 16% per year. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Grocery Outlet Holding's earnings, revenue and cash flow.
A Different Perspective
Grocery Outlet Holding shareholders are down 30% for the year, but the market itself is up 23%. 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 5% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Grocery Outlet Holding by clicking this link.
Grocery Outlet Holding 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
