As an investor its worth striving to ensure your overall portfolio beats the market average. 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 Lands’ End, Inc. (NASDAQ:LE) shareholders have had that experience, with the share price dropping 27% in three years, versus a market return of about 55%.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
It’s good to see that Lands’ End went from making a loss to making a profit, within the last three years. We would usually expect to see the share price rise as a result. So given the share price is down it’s worth checking some other metrics too.
With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. We’re not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
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. If you are thinking of buying or selling Lands’ End stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Lands’ End shareholders are down 1.4% for the year, but the broader market is up 2.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn’t as bad as the 10.0% per annum loss investors have suffered over the last three years. We’d need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing 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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.