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The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in La-Z-Boy Incorporated (NYSE:LZB) have tasted that bitter downside in the last year, as the share price dropped 36%. That's disappointing when you consider the market returned 7.7%. However, the longer term returns haven't been so bad, with the stock down 16% in the last three years. The falls have accelerated recently, with the share price down 23% in the last three months.
After losing 6.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the La-Z-Boy share price fell, it actually saw its earnings per share (EPS) improve by 88%. It's quite possible that growth expectations may have been unreasonable in the past.
The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.
La-Z-Boy's revenue is actually up 39% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that La-Z-Boy has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think La-Z-Boy will earn in the future (free profit forecasts).
A Different Perspective
While the broader market gained around 7.7% in the last year, La-Z-Boy shareholders lost 35% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand La-Z-Boy better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with La-Z-Boy (including 1 which can't be ignored) .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.