Shareholders in El Pollo Loco Holdings (NASDAQ:LOCO) are in the red if they invested three years ago
As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term El Pollo Loco Holdings, Inc. (NASDAQ:LOCO) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around 21%. In contrast, the stock price has popped 8.1% in the last thirty days. But this could be related to good market conditions, with stocks up around 7.3% during the period.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for El Pollo Loco Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Although the share price is down over three years, El Pollo Loco Holdings actually managed to grow EPS by 9.2% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
Revenue is actually up 3.8% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating El Pollo Loco Holdings further; while we may be missing something on this analysis, there might also be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. If you are thinking of buying or selling El Pollo Loco Holdings stock, you should check out this free report showing analyst profit forecasts.
What About The Total Shareholder Return (TSR)?
We've already covered El Pollo Loco Holdings' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. El Pollo Loco Holdings hasn't been paying dividends, but its TSR of -41% exceeds its share price return of -49%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
While the broader market gained around 19% in the last year, El Pollo Loco Holdings shareholders lost 18%. 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 5% 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. It's always interesting to track share price performance over the longer term. But to understand El Pollo Loco Holdings better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with El Pollo Loco Holdings .
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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.
