For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term UniFirst Corporation (NYSE:UNF) shareholders, since the share price is down 26% in the last three years, falling well short of the market return of around 21%.

While the last three years has been tough for UniFirst shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, UniFirst's earnings per share (EPS) dropped by 3.1% each year. The share price decline of 10% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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 UniFirst's earnings, revenue and cash flow.

A Different Perspective

UniFirst shareholders are up 2.5% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 1.4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Before forming an opinion on UniFirst you might want to consider these 3 valuation metrics.

Of course UniFirst may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.