Investors in Grocery Outlet Holding (NASDAQ:GO) have unfortunately lost 64% over the last three years

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a day ago

While not a mind-blowing move, it is good to see that the Grocery Outlet Holding Corp. (NASDAQ:GO) share price has gained 20% in the last three months. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 64% in that time. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Grocery Outlet Holding saw its EPS decline at a compound rate of 33% per year, over the last three years. This change in EPS is reasonably close to the 29% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
Investors in Grocery Outlet Holding had a tough year, with a total loss of 38%, against a market gain of about 13%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% 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. It's always interesting to track share price performance over the longer term. But to understand Grocery Outlet Holding better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Grocery Outlet Holding you should be aware of.
Grocery Outlet Holding is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.
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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