Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Flanigan's Enterprises, Inc. (NYSEMKT:BDL) share price slid 17% over twelve months. That's disappointing when you consider the market returned 3.1%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 1.8% in three years. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 9.4%. However, this may be a matter of broader market optimism, since stocks are up 4.8% in the same time.
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 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.
Unfortunately Flanigan's Enterprises reported an EPS drop of 5.0% for the last year. The share price decline of 17% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Flanigan's Enterprises's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Flanigan's Enterprises shareholders, and that cash payout explains why its total shareholder loss of 16%, over the last year, isn't as bad as the share price return.
A Different Perspective
Investors in Flanigan's Enterprises had a tough year, with a total loss of 16% (including dividends) , against a market gain of about 3.1%. 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 4.0% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on Flanigan's Enterprises it might be wise to click here to see if insiders have been buying or selling shares.
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.
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.