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It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the El Pollo Loco Holdings, Inc. (NASDAQ:LOCO) share price slid 47% over twelve months. That falls noticeably short of the market decline of around 9.3%. However, the longer term returns haven't been so bad, with the stock down 2.8% in the last three years.
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.
View our latest analysis for El Pollo Loco Holdings
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Unhappily, El Pollo Loco Holdings had to report a 10% decline in EPS over the last year. This reduction in EPS is not as bad as the 47% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on El Pollo Loco Holdings' earnings, revenue and cash flow.
A Different Perspective
We regret to report that El Pollo Loco Holdings shareholders are down 47% for the year. Unfortunately, that's worse than the broader market decline of 9.3%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. 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. Before forming an opinion on El Pollo Loco Holdings you might want to consider these 3 valuation metrics.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.