Ruth's Hospitality Group (NASDAQ:RUTH) investors are sitting on a loss of 24% if they invested a year ago
The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Ruth's Hospitality Group, Inc. (NASDAQ:RUTH) shareholders over the last year, as the share price declined 25%. That's disappointing when you consider the market declined 17%. Even if shareholders bought some time ago, they wouldn't be particularly happy: the stock is down 22% in three years. The falls have accelerated recently, with the share price down 19% in the last three months. Of course, this share price action may well have been influenced by the 15% decline in the broader market, throughout the period.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Ruth's Hospitality Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 last year Ruth's Hospitality Group grew its earnings per share, moving from a loss to a profit.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action. So it makes sense to check out some other factors.
Ruth's Hospitality Group managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Ruth's Hospitality Group has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Ruth's Hospitality Group in this interactive graph of future profit estimates.
A Different Perspective
We regret to report that Ruth's Hospitality Group shareholders are down 24% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 Ruth's Hospitality Group you should know about.
We will like Ruth's Hospitality Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.
