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J&J Snack Foods (NASDAQ:JJSF) shareholders have endured a 25% loss from investing in the stock three years ago

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. Unfortunately, that's been the case for longer term J&J Snack Foods Corp. (NASDAQ:JJSF) shareholders, since the share price is down 29% in the last three years, falling well short of the market return of around 30%. More recently, the share price has dropped a further 11% in a month. We do note, however, that the broader market is down 11% in that period, and this may have weighed on the share price.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

Check out our latest analysis for J&J Snack Foods

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.

During the three years that the share price fell, J&J Snack Foods' earnings per share (EPS) dropped by 20% each year. In comparison the 11% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 53.72, it's fair to say the market sees a brighter future for the business.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of J&J Snack Foods' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for J&J Snack Foods the TSR over the last 3 years was -25%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Although it hurts that J&J Snack Foods returned a loss of 9.5% in the last twelve months, the broader market was actually worse, returning a loss of 22%. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand J&J Snack Foods better, we need to consider many other factors. Take risks, for example - J&J Snack Foods has 2 warning signs (and 1 which is significant) we think you should know about.

But note: J&J Snack Foods may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.

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