Optimism around Zumiez (NASDAQ:ZUMZ) delivering new earnings growth may be shrinking as stock declines 20% this past week
Taking the occasional loss comes part and parcel with investing on the stock market. Anyone who held Zumiez Inc. (NASDAQ:ZUMZ) over the last year knows what a loser feels like. The share price is down a hefty 56% in that time. Even if you look out three years, the returns are still disappointing, with the share price down55% in that time. Shareholders have had an even rougher run lately, with the share price down 40% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
After losing 20% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for Zumiez
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Unfortunately Zumiez reported an EPS drop of 96% for the last year. This fall in the EPS is significantly worse than the 56% the share price fall. It may have been that the weak EPS was not as bad as some had feared. Indeed, with a P/E ratio of 87.91 there is obviously some real optimism that earnings will bounce back.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Zumiez's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 3.5% in the last year, Zumiez shareholders lost 56%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Zumiez you should know about.
Of course Zumiez may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.
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