On Friday, November 22nd Foot Locker (NYSE:FL) is expected to report earnings for its fiscal third quarter. Analysts are expecting the company to report earnings per share of $0.66 on revenue of approximately $1.6 billion. If successful in achieving this goal, it will mean that the company saw earnings per share decline by 4.3% from the $0.69 it reported during the same quarter a year ago. However, just because analysts expect this to transpire doesn't mean that it necessarily will.

For the Foolish investor, the key point should be not to focus so much on earnings because of the short-term mentality that it requires. Rather, it is more advisable to form an assessment of the merits and risks of a prospective investment by analyzing the company's performance over the past few years. Doing so should give you a better sense of whether or not you are comfortable holding the investment immediately before earnings.

Foot Locker has been improving dramatically!
For the past four years, Foot Locker's business has been improving rapidly, as demonstrated by revenue and net income growth. Revenue has increased every year since 2010, rising by 27.4% from $4.8 billion to $6.2 billion. The Finish Line (NASDAQ:FINL), a direct competitor to Foot Locker, saw similar growth with revenue rising by 23.1% from $1.2 billion to $1.4 billion over the same time horizon.

Though both companies grew revenue at nearly the same pace, Foot Locker far outpaced Finish Line in growing its net income. Over the past four years, Foot Locker has seen its net income grow by 727.1% from $48 million to $397 million. Increased revenue helped play a role in this improvement, but cost containment was a large contributor too.

This is best illustrated by looking at the company's cost of goods sold and selling, general and administrative expenses as a percentage of sales. Over the four-year time frame, Foot Locker saw its cost of goods sold fall from 72.6% of sales to 67.1% of sales. Likewise, its SG&A expenses fell from 22.6% of sales to 20.9%.

Finish Line, by comparison, saw a nice increase in net income, but it hasn't come close to keeping up with Foot Locker. Over the past four years, the company saw net income rise by 100.3% from $35.7 million to $71.5 million. If you remove the loss it was hit with for discontinued operations in 2010, however, its growth rate would have amounted to 40.5%. Its lackluster improvement was caused by a failure to capture savings from cost containment.

Year-to-date, the situation has pretty much been the same as the past few years, with one exception. While Foot Locker saw its net income rise by 11.9% to $1.4 billion last quarter, compared to Finish Line's 6% growth rate to $436 million, it was Finish Line that came out on top in revenue growth. For its second quarter of this year, the company saw revenue rise by 13.2%, more than twice the 6.4% that Foot Locker experienced.

Foolish takeaway
Last quarter, Finish Line upstaged Foot Locker in growing its top line but fell short on the bottom line. The past four years have been even worse for Finish Line, which saw revenue and net income increase at a much slower pace than it did for Foot Locker.  This is a sign that the company has failed to maintain competitiveness. .

Moving forward, it is possible that the situation may reverse itself or that both Foot Locker and Finish Line may grow rapidly in concert, but it appears as though Foot Locker presents the most attractive value prospects in the near-to-medium term.

Historically, Foot Locker has significantly outperformed its rival.  However, even in spite of its outperformance, it appears as though Mr. Market isn't expecting much out of the company for the most recent quarter.  For the Foolish investor who owns shares and believes in the shoe retailer's future, this could imply significant returns if the company manages to pull off an earnings beat.  Add this to the long-term prospects that exist and you might just have a winner.   .

Daniel Jones has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.