As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Foot Locker, Inc. (NYSE:FL) shareholders have had that experience, with the share price dropping 50% in three years, versus a market return of about 24%. Unfortunately the share price momentum is still quite negative, with prices down 18% in thirty days. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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. 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.

Over the three years that the share price declined, Foot Locker's earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Foot Locker's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Foot Locker's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Foot Locker shareholders, and that cash payout explains why its total shareholder loss of 44%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Foot Locker shareholders gained a total return of 28% during the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 6% per year, over five years. So this might be a sign the business has turned its fortunes around. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 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.